LOAN AND SECURITY AGREEMENT by and among HANCOCK FABRICS, INC. HF MERCHANDISING, INC. HANCOCK FABRICS OF MI, INC. HANCOCKFABRICS.COM, INC. HANCOCK FABRICS, LLC, each a debtor and debtor-in-possession, as Borrowers and HF ENTERPRISES, INC. HF...
Exhibit
99.1
EXECUTION
VERSION
by
and
among
XXXXXXX
FABRICS, INC.
HF
MERCHANDISING, INC.
XXXXXXX
FABRICS OF MI, INC.
XXXXXXXXXXXXXX.XXX,
INC.
XXXXXXX
FABRICS, LLC,
each
a
debtor and debtor-in-possession,
as
Borrowers
and
HF
ENTERPRISES, INC.
HF
RESOURCES, INC.,
each
a
debtor and debtor-in-possession,
as
Guarantors
THE
LENDERS FROM TIME TO TIME PARTY HERETO
and
ABLECO
FINANCE LLC
as
Agent
Dated:
June 15, 2007
SECTION
1. DEFINITIONS
|
2
|
SECTION
2. CREDIT FACILITIES
|
25
|
2.1
Loans
|
25
|
2.2
Commitments
|
26
|
2.3
Mandatory Prepayments
|
26
|
2.4
Joint and Several Liability
|
27
|
2.5
Securitization
|
27
|
SECTION
3. INTEREST AND FEES
|
28
|
3.1
Interest
|
28
|
3.2
Fees
|
29
|
3.3
Changes in Laws and Increased Costs of Loan
|
29
|
SECTION
4. CONDITIONS PRECEDENT
|
31
|
4.1
Conditions Precedent to the Loan
|
31
|
4.2
Conditions Precedent to Delayed Draw Loan
|
34
|
SECTION
5. SECURITY AND ADMINISTRATIVE PRIORITY
|
35
|
5.1
Collateral; Grant of Lien and Security Interest
|
36
|
5.2
Administrative Priority
|
36
|
5.3
Grants, Rights and Remedies
|
36
|
5.4
No Filings Required
|
36
|
5.5
Survival
|
37
|
5.6
Further Assurances
|
37
|
SECTION
6. COLLECTION AND ADMINISTRATION
|
38
|
6.1
Borrowers’ Loan Accounts
|
38
|
6.2
Statements
|
38
|
6.3
Collection of Accounts
|
38
|
6.4
Payments
|
38
|
6.5
Taxes
|
39
|
6.6
Authorization to Make Loans
|
41
|
6.7
Use of Proceeds
|
41
|
6.8
Appointment of Administrative Borrower as Agent for Requesting Loan
and
Receipts
of Loan and Statements
|
42
|
6.9
Pro Rata Treatment
|
43
|
6.10
Sharing of Payments, Etc.
|
43
|
6.11
Obligations Several; Independent Nature of Lenders’ Rights
|
44
|
SECTION
7. COLLATERAL REPORTING AND COVENANTS
|
44
|
(ii)
7.1
Collateral Reporting
|
44
|
7.2
Accounts Covenants
|
46
|
7.3
Inventory Covenants
|
46
|
7.4
Equipment and Real Property Covenants
|
47
|
7.5
Power of Attorney
|
48
|
7.6
Right to Cure
|
49
|
7.7
Access to Premises
|
49
|
SECTION
8. REPRESENTATIONS AND WARRANTIES
|
49
|
8.1
Existence, Power and Authority
|
50
|
8.2
Name; State of Organization; Chief Executive Office; Collateral
Locations
|
50
|
8.3
Financial Statements; No Material Adverse Change
|
51
|
8.4
Priority of Liens; Title to Properties
|
51
|
8.5
Tax Returns
|
51
|
8.6
Litigation
|
51
|
8.7
Compliance with Other Agreements and Applicable Laws
|
52
|
8.8
Environmental Compliance
|
52
|
8.9
Employee Benefits
|
53
|
8.10
Bank Accounts
|
54
|
8.11
Intellectual Property
|
54
|
8.12
Subsidiaries; Affiliates; Capitalization; Solvency
|
55
|
8.13
Labor Disputes
|
55
|
8.14
Restrictions on Subsidiaries
|
56
|
8.15
Material Contracts
|
56
|
8.16
Credit Card Agreements
|
56
|
8.17
Interrelated Businesses
|
57
|
8.18
Payable Practices
|
57
|
8.19
Accuracy and Completeness of Information
|
57
|
8.20
Survival of Warranties; Cumulative
|
57
|
8.21
Administrative Priority; Lien Priority
|
58
|
8.22
Appointment of Trustee or Examiner; Liquidation
|
58
|
SECTION
9. AFFIRMATIVE AND NEGATIVE COVENANTS
|
58
|
9.1
Maintenance of Existence
|
58
|
9.2
New Collateral Locations
|
59
|
9.3
Compliance with Laws, Regulations, Etc.
|
59
|
9.4
Payment of Taxes and Claims
|
60
|
9.5
Insurance
|
60
|
9.6
Financial Statements and Other Information
|
61
|
9.7
Sale of Assets, Consolidation, Merger, Dissolution, Etc.
|
63
|
9.8
Encumbrances
|
66
|
9.9
Indebtedness
|
68
|
9.10
Loans, Investments, Etc.
|
71
|
9.11
Restricted Payments
|
73
|
9.12
Transactions with Affiliates
|
73
|
9.13
Compliance with ERISA
|
73
|
9.14
End of Fiscal Years; Fiscal Quarters
|
73
|
(iii)
9.15
Change in Business
|
74
|
9.16
Limitation of Restrictions Affecting Subsidiaries
|
74
|
9.17
License Agreements
|
74
|
9.18
Credit Card Agreements
|
75
|
9.19
Material Adverse Deviation
|
75
|
9.20
After Acquired Real Property
|
76
|
9.21
Foreign Assets Control Regulations, Etc.
|
76
|
9.22
Costs and Expenses
|
76
|
9.23
Further Assurances
|
77
|
9.24
Bankruptcy Court Orders; Administrative Priority; Lien Priority;
Payment
of Claims
|
78
|
9.25
Payments
|
79
|
SECTION
10. EVENTS OF DEFAULT AND REMEDIES
|
79
|
10.1
Events of Default
|
79
|
10.2
Remedies
|
84
|
SECTION
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING
LAW
|
87
|
11.1
Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver
|
87
|
11.2
Waiver of Notices
|
89
|
11.3
Amendments and Waivers
|
89
|
11.4
Waiver of Counterclaims
|
91
|
11.5
Indemnification
|
91
|
SECTION
12. THE AGENT
|
91
|
12.1
Appointment, Powers and Immunities
|
91
|
12.2
Reliance by Agent
|
92
|
12.3
Events of Default
|
92
|
12.4
Ableco in its Individual Capacity
|
93
|
12.5
Indemnification
|
93
|
12.6
Non-Reliance on Agent and Other Lenders
|
93
|
12.7
Failure to Act
|
94
|
12.8
Intentionally Omitted
|
94
|
12.9
Concerning the Collateral and the Related Financing
Agreements
|
94
|
12.10
Field Audit, Examination Reports and other Information; Disclaimer
by
Lenders
|
94
|
12.11
Collateral Matters
|
95
|
12.12
Agency for Perfection
|
96
|
12.13
Successor Agent
|
96
|
12.14
Other Agent Designations
|
97
|
SECTION
13. TERM OF AGREEMENT; MISCELLANEOUS
|
97
|
13.1
Term
|
97
|
13.2
Interpretative Provisions
|
98
|
13.3
Notices
|
100
|
13.4
Partial Invalidity
|
101
|
(iv)
13.5
Confidentiality
|
101
|
13.6
Successors
|
103
|
13.7
Assignments; Participations
|
103
|
13.8
Entire Agreement
|
106
|
13.9
Counterparts, Etc.
|
107
|
SECTION
14. GUARANTY
|
107
|
14.1
Guaranty
|
107
|
14.2
Guaranty Absolute
|
107
|
14.3
Waiver
|
108
|
14.4
Continuing Guaranty; Assignments
|
108
|
14.5
Subrogation
|
109
|
(v)
INDEX
TO
EXHIBITS
AND SCHEDULES
Exhibit
A
|
Form
of Assignment and Acceptance
|
Exhibit
B
|
Information
Certificate
|
Exhibit
C
|
Form
of Compliance Certificate
|
Schedule
1.17
|
Budget
|
Schedule
1.29
|
Commitments
|
Schedule
1.94
|
Owned
Store Real Properties
|
Schedule
1.138
|
Working
Capital Lender Agreements
|
Schedule
8.16
|
Credit
Card Agreements
|
(vi)
EXECUTION
VERSION
This
Loan
and Security Agreement dated June 15, 2007 is entered into by and among Xxxxxxx
Fabrics, Inc, a Delaware corporation, as debtor and debtor-in-possession
("Parent"), HF Merchandising, Inc., a Delaware corporation, as debtor and
debtor-in-possession ("Merchandising"), Xxxxxxx Fabrics of MI, Inc., a Delaware
corporation, as debtor and debtor-in-possession ("Fabrics MI"),
xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation, as debtor and
debtor-in-possession ("Xxxxxxx.xxx"), Xxxxxxx Fabrics, LLC, a Delaware limited
liability company, as debtor and debtor-in-possession ("Fabrics LLC", and
together with Parent, Merchandising, Fabrics MI and Xxxxxxx.xxx, each
individually a "Borrower" and collectively, "Borrowers" as hereinafter further
defined), HF Enterprises, Inc., a Delaware corporation, as debtor and
debtor-in-possession ("Enterprises"), HF Resources, Inc., a Delaware
corporation, as debtor and debtor-in-possession ("Resources", and together
with
Enterprises, each individually a "Guarantor" and collectively, "Guarantors"
as
hereinafter further defined), the parties hereto from time to time as lenders,
whether by execution of this Agreement or an Assignment and Acceptance (each
individually, a "Lender" and collectively, "Lenders" as hereinafter further
defined) and Ableco Finance LLC, a Delaware limited liability company, in its
capacity as agent for Lenders (in such capacity, "Agent" as hereinafter further
defined).
SECTION
1. DEFINITIONS
For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:
1.1 "Ableco"
shall mean Ableco Finance LLC, a Delaware limited liability company, in its
individual capacity and its successors and assigns.
1.2 "Accounts"
shall mean, as to each Borrower and Guarantor, all present and future rights
of
such Borrower and Guarantor to payment of a monetary obligation, whether or
not
earned by performance, which is not evidenced by chattel paper or an instrument,
(a) for property that has been or is to be sold, leased, licensed, assigned,
or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for
a
secondary obligation incurred or to be incurred, or (d) arising out of the
use
of a credit or charge card or information contained on or for use with the
card.
1.3 "Adjusted
Eurodollar Rate" shall mean, with respect to each Interest Period for any
Eurodollar Rate Loan comprising part of the same borrowing (including
conversions, extensions and renewals), the rate per annum determined
by dividing (a) the London Interbank Offered Rate for such Interest Period
by
(b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage;
provided, that the Adjusted Eurodollar Rate shall not be less than
5.25%. For purposes hereof, "Reserve Percentage" shall mean for any
day, that percentage (expressed as a decimal) which is in effect from time
to
time under Regulation D of the Board of Governors of the Federal Reserve System
(or any successor), as such regulation may be amended from time to time or
any
successor regulation, as the maximum reserve requirement (including, without
limitation, any basic, supplemental, emergency, special, or marginal reserves)
applicable with respect to Eurocurrency liabilities as that term is defined
in
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of Eurodollar Loans is
determined), whether or not any Lender has any Eurocurrency liabilities subject
to such reserve requirement at that time. Eurodollar Loans shall be
deemed to constitute Eurocurrency liabilities and as such shall be deemed
subject to reserve requirements without benefits of credits for proration,
exceptions or offsets that may be available from time to time to a
Lender. The Adjusted Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in the Reserve
Percentage.
1.4 "Administrative
Borrower" shall mean Xxxxxxx Fabrics, Inc., a Delaware corporation, as debtor
and debtor-in-possession, in its capacity as Administrative Borrower on behalf
of itself and the other Borrowers pursuant to Section 6.8 hereof and it
successors and assigns in such capacity.
1.5 "Affiliate"
shall mean, with respect to a specified Person, any other Person which directly
or indirectly, through one or more intermediaries, controls or is controlled
by
or is under common control with such Person, and without limiting the generality
of the foregoing, includes (a) any Person which beneficially owns or holds
ten
(10%) percent or more of any class of Voting Stock of such Person or other
equity interests in such Person, (b) any Person of which such Person
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock or in which such Person beneficially owns or holds ten (10%) percent
or
more of the equity interests and (c) any director or executive officer of such
Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
2
1.6 "Affiliate
Subordination Agreement" shall mean the Affiliate Subordination Agreement,
dated
as of the date hereof, by and among Agent, Resources and Enterprises, as
acknowledged and agreed to by Parent and Merchandising.
1.7 "Agent"
shall mean Ableco Finance LLC, in its capacity as agent on behalf of Lenders
pursuant to the terms hereof and any replacement or successor agent
hereunder.
1.8 "Agent
Payment Account" shall mean an account designated by Agent from time to time
as
the account into which Borrowers shall make all payments to Agent for the
benefit of Agent and Lenders under this Agreement and the other Financing
Agreements.
1.9 "Agreed
Administrative Expense Priorities" means that administrative expenses with
respect to the Borrowers and the Guarantors and, with respect to sub-clause
(ii)
of clause "first", any official committee appointed by the Bankruptcy
Court, shall have the following order of priority:
first,
(i) amounts payable pursuant to 28 U.S.C. § 1930(a)(6) and
(ii) amounts payable in respect of clause (y) of the definition of
"Carve-Out Expenses", provided that the amount entitled to priority under
this sub-clause (ii) of this clause first ("Priority Professional
Expenses"), less the amount of any retainers held by any professionals retained
in the Chapter 11 Cases, and the allowed unpaid and outstanding reasonable
expenses actually incurred on or after the Petition Date by the members of
the
Creditors Committee (as defined in the Financing Order), in a cumulative,
aggregate sum shall not exceed $1,100,000 outstanding in the aggregate at any
time (the "Professional Expense Cap"), of which such Professional Expense Cap,
a
cumulative, aggregate sum not to exceed $600,000 shall be exclusively for the
allowed, unpaid and outstanding reasonable fees and expenses actually incurred
by Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Capital, Inc. (and no other party) in
accordance with and subject to the terms of the Financing Order;
provided, however, that (A) during any Carve-Out Expense
Reduction Period, any payments actually made in respect of Carve-Out Expenses,
shall reduce the Professional Expense Cap on a dollar-for-dollar basis, and
(B) for the avoidance of doubt, so long as no Carve-Out Expense Reduction
Period shall be continuing, the payment of Carve-Out Expenses shall not reduce
the Professional Expense Cap,
second,
subject to the terms of the Intercreditor Agreement, the Working Capital
Debt,
third,
all Obligations, and
3
fourth,
all other allowed
administrative expenses.
1.10 "Assignment
and Acceptance" shall mean an Assignment and Acceptance substantially in the
form of Exhibit A attached hereto or such other form as be acceptable to Agent
(with blanks appropriately completed) delivered to Agent in connection with
an
assignment of a Lender's interest hereunder in accordance with the provisions
of
Section 13.7 hereof.
1.11 "Baldwyn
Real Property" shall mean the Real Property of Parent located in Baldwyn,
Mississippi.
1.12 "BancorpSouth
Deposit Account Control Agreement" shall mean the Deposit Account Control
Agreement, dated June 29, 2005, by and among Parent, Bancorp South Bank and
Working Capital Agent, as the same now exists and may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.13 "Bankruptcy
Code" shall mean the United States Bankruptcy Code, being Title 11 of the United
States Code as enacted in 1978, as the same has heretofore been or may hereafter
be amended, recodified, modified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.14 "Bankruptcy
Court" shall mean the United States Bankruptcy Court for the District of
Delaware or the United States District Court for the District of
Delaware.
1.15 "Blocked
Accounts" shall have the meaning set forth in Section 6.3 of the Working Capital
Loan Agreement as in effect on the date hereof.
1.16 "Borrowers"
shall mean, collectively, the following (together with their respective
successors and assigns): (a) Xxxxxxx Fabrics, Inc., a Delaware
corporation, as debtor and debtor-in-possession; (b) HF Merchandising, Inc,
a
Delaware corporation, as debtor and debtor-in-possession; (c) Xxxxxxx Fabrics
of
MI, Inc., a Delaware corporation, as debtor and debtor-in-possession; (d)
xxxxxxxxxxxxxx.xxx, Inc., a Delaware corporation, as debtor and
debtor-in-possession; (e) Xxxxxxx Fabrics, LLC, a Delaware limited liability
company, as debtor and debtor-in-possession, and (f) any other Person that
at
any time after the date hereof becomes a Borrower; each sometimes being referred
to herein individually as a "Borrower".
1.17 "Borrowing
Base" shall mean the term "Borrowing Base" as defined, together with the terms
used therein, in the Working Capital Loan Agreement as in effect on the date
hereof, after giving effect to all Reserves.
1.18 "Budget"
shall mean the initial budget of Borrowers and Guarantors to be delivered to
Agent and Lenders in accordance with Section 4.1(p) hereof setting forth the
Projected Information for the periods covered thereby, satisfactory in form
and
substance to Agent and attached as Schedule 1.17 hereto, together with any
subsequent or amended budget(s) thereto delivered to Agent and Lenders pursuant
to Section 7.1(c) hereof.
1.19 "Business
Day" shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the
State
of New York, and a day on which Agent is open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks
are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
4
1.20 "Capital
Leases" shall mean, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed)
by
such Person as lessee which in accordance with GAAP, is required to be reflected
as a liability on the balance sheet of such Person.
1.21 "Capital
Stock" shall mean, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests
(but
excluding any debt security that is exchangeable for or convertible into such
capital stock).
1.22 "Carve-Out
Expenses" means any payments permitted to be made by the Bankruptcy Court in
respect of (x) amounts payable pursuant to 28 U.S.C. § 1930(a)(6) and (y)
the unpaid and outstanding reasonable fees and expenses actually incurred on
or
after the Petition Date and allowed by order of the Bankruptcy Court pursuant
to
Sections 326, 327, 328, 330, 331 and 1103 of the Bankruptcy Code by attorneys,
accountants and other professionals retained by the Borrowers, Guarantors,
the
Creditors Committee (as defined in the Financing Order) or the Equity Committee
(as defined in the Financing Order) under Section 327 or 1103(a) of the
Bankruptcy Code.
1.23 "Carve-Out
Expense Reduction Period" means any period during which an Event of Default
under this Agreement or a default by any Borrower or Guarantor in any of its
obligations under the Financing Order shall have occurred and be
continuing.
1.24 "Cash
Equivalents" shall mean, at any time, (a) any evidence of Indebtedness with
a
maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit
or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$1,000,000,000; (c) commercial paper (including variable rate demand notes)
with
a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State
of
the United States of America or the District of Columbia and rated at least
A-1
by Standard & Poor's Ratings Service, a division of The XxXxxx-Xxxx
Companies, Inc. or at least P-1 by Xxxxx'x Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $1,000,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within ninety (90) days or
less
from the date of acquisition; provided, that, the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets
in
securities of the types described in clauses (a) through (e) above.
5
1.25 "Change
of Control" shall mean (a) the transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or
Guarantor to any Person or group (as such term is used in Section 13(d)(3)
of
the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the
liquidation or dissolution of any Borrower or Guarantor or the adoption of
a
plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board
of
Directors (or similar governing body) of any Borrower or Guarantor (together
with any new directors whose nomination for election by the stockholders of
such
Borrower or Guarantor was approved by a vote of at least a majority of the
directors (or similar persons) then still in office who were either directors
(or similar persons) at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors (or similar governing body)
of
any Borrower or Guarantor then still in office; or (d) the failure of Parent
to
own and control, directly or indirectly, one hundred (100%) percent of the
voting power of the total outstanding Voting Stock of any other Borrower or
Guarantor.
1.26 "Chapter
11 Cases" shall mean the Chapter 11 cases of Borrowers and Guarantors which
are
being jointly administered under the Bankruptcy Code and are pending in the
Bankruptcy Court.
1.27 "Code"
shall mean the Internal Revenue Code of 1986, as the same now exists or may
from
time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.28 "Collateral"
shall mean all of the real or personal property, and interests in real or
personal property, of each Borrower and Guarantor, including, without
limitation, all property of each such Person's "estate" (within the meaning
of
the Bankruptcy Code), whether now owned or hereafter acquired or existing,
and
wherever located (together with all other collateral security for the
Obligations at any time granted to or held or acquired by Agent or any Lender),
including, without limitation:
(a) all
Accounts;
(b) all
general intangibles, including, without limitation, Intellectual
Property;
(c) all
goods, including without limitation, Inventory and Equipment;
(d) all
Real
Property and fixtures;
6
(e) all
chattel paper, including without limitation, all tangible and
electronic chattel paper;
(f) all
instruments. including without limitation, all promissory notes;
(g) all
documents;
(h) all
deposit accounts;
(i) all
letters of credit, banker's acceptances and similar instruments and including
all letter of credit rights;
(j) all
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (i) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral; (ii) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party; (iii) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, other Collateral, including returned, repossessed and reclaimed
goods; and (iv) deposits by and property of account debtors and other persons
securing the obligations of account debtors;
(k) all
(i)
investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts
or commodity accounts) and (ii) monies, credit balances, deposits and other
property of any Borrower or Guarantor now or hereafter held or received by
or in
transit to Agent or any Lender or its Affiliates at any other depository or
other institution from or for the account of any Borrower or Guarantor, whether
for safekeeping, pledge, custody transmission, collection or
otherwise;
(l) all
commercial tort claims, including, without limitation, those identified in
the
Information Certificate;
(m) to
the
extent not described above, all Receivables;
(n) subject
to the Financing Order, all leasehold real property interests existing as of
March 22, 2007, excluding fixtures located at the property subject to such
leaseholds (collectively, the "Real Property Leasehold Interests");
(o) all
Records; and
(p) all
products and proceeds of the foregoing, in any form, including insurance
proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any
or
all of the other Collateral.
Notwithstanding
anything to the contrary contained in this Agreement or the other Financing
Agreements, the Collateral shall not include the following (collectively, the
"Excluded Collateral Items"): (i) any actions maintained or taken pursuant
to
Sections 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code,
and
(ii) any proceeds of the items referred to in clause (i) of this paragraph;
provided, that all such proceeds referenced in this clause (ii) shall at all
times be segregated by Borrowers and Guarantors from the proceeds of Agent's
and
Lender's Collateral and the Loan provided by Agent and Lenders to
Borrowers.
7
1.29 "Commitment"
shall mean, at any time, as to each Lender, the principal amount set forth
opposite such Lender's name on Schedule 1.29 hereto or on Schedule 1 to the
Assignment and Acceptance Agreement pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of Section 13.7 hereof,
as
the same may be adjusted from time to time in accordance with the terms hereof;
sometimes being collectively referred to herein as "Commitments".
1.30 "Consolidated
Net Income" shall mean, with respect to any Person for any period, the aggregate
of the net income (loss) of such Person and its Subsidiaries, on a consolidated
basis, for such period (and as to Borrowers and Guarantors, excluding to the
extent included therein (i) any extraordinary, one-time or non-recurring gains,
(ii) extraordinary, one-time or non-recurring non-cash losses or charges, and
(iii) operations that have been discontinued on or before the date hereof)
after
deducting all charges which should be deducted before arriving at the net income
(loss) for such period (but without regard to operations that have been
discontinued on or before the date hereof) and after deducting the Provision
for
Taxes for such period, all as determined in accordance with GAAP; provided,
that, (a) the net income of any Person that is not a wholly-owned Subsidiary
or
that is accounted for by the equity method of accounting shall be included
only
to the extent of the amount of dividends or distributions paid or payable to
such Person or a wholly-owned Subsidiary of such Person; (b) except to the
extent included pursuant to the foregoing clause, the net income of any Person
accrued prior to the date it becomes a wholly-owned Subsidiary of such Person
or
is merged into or consolidated with such Person or any of its wholly-owned
Subsidiaries or that Person's assets are acquired by such Person or by any
of
its wholly-owned Subsidiaries shall be excluded; (c) the effect of any change
in
accounting principles adopted by such Person or its Subsidiaries after the
date
hereof shall be excluded; (d) net income shall exclude interest accruing, but
not paid, on indebtedness owing to a Subsidiary or parent corporation of such
Person; and (e) the net income (if positive) of any wholly-owned Subsidiary
to
the extent that the declaration or payment of dividends or similar distributions
by such wholly-owned Subsidiary to such Person or to any other wholly-owned
Subsidiary of such Person is not at the time permitted by operation of the
terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such wholly-owned Subsidiary
shall
be excluded . For the purposes of this definition, net income
excludes any gain and non-cash loss together with any related Provision for
Taxes for such gain and non-cash loss realized upon the sale or other
disposition of any assets that are not sold in the ordinary course of business
(including, without limitation, dispositions pursuant to sale and leaseback
transactions and for this purpose sales or other dispositions of retail store
locations shall not be deemed to be in the ordinary course of the business
of
Borrowers and Guarantors) or of any Capital Stock of such Person or a Subsidiary
of such Person and any net income or non-cash loss realized as a result of
changes in accounting principles or the application thereof to such
Person.
1.31 "Credit
Card Agreements" shall mean all agreements now or hereafter entered into by
any
Borrower or any Guarantor for the benefit of any Borrower, in each case with
any
Credit Card Issuer or any Credit Card Processor, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, including, but not limited to, the agreements set forth on Schedule
8.16 hereto.
8
1.32 "Credit
Card Issuer" shall mean any person (other than a Borrower) who issues or whose
members issue credit cards, including, without limitation, MasterCard or VISA
bank credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and
American Express, Discover, Diners Club, Xxxxx Xxxxxxx and other non-bank credit
or debit cards, including, without limitation, credit or debit cards issued
by
or through American Express Travel Related Services Company, Inc., and Discover
Financial Services, Inc.
1.33 "Credit
Card Processor" shall mean any servicing or processing agent or any factor
or
financial intermediary who facilitates, services, processes or manages the
credit authorization, billing transfer and/or payment procedures with respect
to
any Borrower's or Guarantor's sales transactions involving credit card or debit
card purchases by customers using credit cards or debit cards issued by any
Credit Card Issuer.
1.34 "Credit
Facility" shall mean the Loans provided to or for the benefit of any Borrower
pursuant to Section 2.1 hereof.
1.35 "Default"
shall mean an act, condition or event which with notice or passage of time
or
both would constitute an Event of Default.
1.36 "Delayed
Draw Loan" shall have the meaning set forth in Section 2.1 hereof.
1.37 "Delayed
Draw Loan Date" shall have the meaning set forth in Section 2.1
hereof.
1.38 "Deposit
Account Control Agreement" shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Working Capital Agent (or Agent,
if applicable), the Borrower or Guarantor with a deposit account at any bank
and
the bank at which such deposit account is at any time maintained which provides
that such bank will comply with instructions originated by Working Capital
Agent
(or Agent, if applicable) directing disposition of the funds in the deposit
account without further consent by such Borrower or Guarantor and has such
other
terms and conditions as Working Capital Agent (or Agent, if applicable) may
require.
1.39 "EBITDA"
shall mean, as to any Person, with respect to any period, an amount equal to:
(a) the Consolidated Net Income of such Person and its Subsidiaries for such
period, plus (b) depreciation, amortization, LIFO adjustments consisting of
non-cash charges, and other non-cash charges, including imputed interest,
deferred compensation and in the case of Borrowers and Guarantors, non-cash
costs associated with the closing of retail store locations, in each case for
such period (to the extent deducted in the computation of Consolidated Net
Income of such Person), all in accordance with GAAP, plus (c) Interest Expense
for such period (to the extent deducted in the computation of Consolidated
Net
Income of such Person), plus (d) the Provision for Taxes for such period (to
the
extent deducted in the computation of Consolidated Net Income of such
Person).
9
1.40 "Eligible
Transferee" shall mean (a) any Lender; (b) the parent company of any Lender
and/or any Affiliate of such Lender; (c) any person (whether a corporation,
partnership, trust or otherwise) that is engaged in the business of making,
purchasing, holding or otherwise investing in bank loans and similar extensions
of credit in the ordinary course of its business and is administered or managed
by a Lender or with respect to any Lender that is a fund which invests in
commercial loans and similar extensions of credit, any Related Fund that invests
in commercial loans and similar extensions of credit, and in each case is
approved by Agent; and (d) any commercial bank, financial institution or
"accredited investor" (as defined in Regulation D under the Securities Act
of
1933) approved by Agent, provided, that, (i) neither any Borrower nor any
Guarantor or any Affiliate of any Borrower or Guarantor shall qualify as an
Eligible Transferee and (ii) no Person to whom any Indebtedness which is in
any
way subordinated in right of payment to any other Indebtedness of any Borrower
or Guarantor shall qualify as an Eligible Transferee, except as Agent may
otherwise specifically agree.
1.41 "Environmental
Laws" shall mean all foreign, Federal, State and local laws (including common
law), legislation, rules, codes, licenses, permits (including any conditions
imposed therein), authorizations, judicial or administrative decisions,
injunctions or agreements between any Borrower or Guarantor and any Governmental
Authority, (a) relating to pollution and the protection, preservation or
restoration of the environment (including air, water vapor, surface water,
ground water, drinking water, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), or to human health
or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation
and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization
Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act
of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.42 "Equipment"
shall mean, as to each Borrower and Guarantor, all of such Borrower's and
Guarantor's now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment (whether owned
or
licensed and including embedded software), vehicles, tools, furniture, fixtures,
all attachments, accessions and property now or hereafter affixed thereto or
used in connection therewith, and substitutions and replacements thereof,
wherever located.
1.43 "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, together with
all rules, regulations and interpretations thereunder or related
thereto.
10
1.44 "ERISA
Affiliate" shall mean any person required to be aggregated with any Borrower,
any Guarantor or any of its or their respective Subsidiaries under Sections
414(b), 414(c), 414(m) or 414(o) of the Code.
1.45 "ERISA
Event" shall mean (a) any "reportable event", as defined in Section 4043(c)
of
ERISA or the regulations issued thereunder, with respect to a Pension Plan,
other than events as to which the requirement of notice has been waived in
regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of
any
amendment to a Pension Plan that would require the provision of security
pursuant to Section 401(a)(29) of the Code or Section 307 of
ERISA; (c) a complete or partial withdrawal by any Borrower,
Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of
operations which is treated as such a withdrawal or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent
to
terminate, the treatment of a Pension Plan amendment as a termination under
Section 4041 or 4041A of ERISA, or the commencement of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event
or condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to
administer, any Plan; (f) the imposition of any liability under Title IV of
ERISA, other than the Pension Benefit Guaranty Corporation premiums due but
not
delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any
ERISA Affiliate in excess of $750,000 and (g) any other event or condition
with
respect to a Plan including any Pension Plan subject to Title IV of ERISA
maintained, or contributed to, by any ERISA Affiliate that could reasonably
be
expected to result in liability of any Borrower in excess of $750,000;
provided, that, the following shall not constitute an ERISA Event: (i)
the commencement of the Chapter 11 Cases, (ii) the financial condition of the
Borrowers and Guarantors immediately prior to the Petition Date as disclosed
to
Agent and Lenders in writing or (iii) the delisting of the stock of Parent
or
any of its Subsidiaries from the New York Stock Exchange.
1.46 "Eurodollar
Rate Loan" shall mean any Loan or portion thereof on which interest is payable
based on the Adjusted Eurodollar Rate in accordance with the terms
hereof.
1.47 "Event
of Default" shall mean the occurrence or existence of any event or condition
described in Section 10.1 hereof.
1.48 "Excess
Availability" shall mean the term "Excess Availability" as defined in the
Working Capital Loan Agreement as in effect on the date hereof.
1.49 "Exchange
Act" shall mean the Securities Exchange Act of 1934, together with all rules,
regulations and interpretations thereunder or related thereto.
1.50 "Excluded
Collateral Items" shall have the meaning set forth in the definition of
"Collateral".
1.51 "Federal
Funds Rate" shall mean, for any period, a fluctuating interest rate per annum
equal, for each day during such period, to the weighted average of the rates
on
overnight Federal Funds transactions with members of the Federal Reserve System
arranged by Federal Funds brokers, as published for such day (or, if such day
is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day that is
a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by it.
11
1.52 "Fee
Letter" shall mean the letter agreement, dated of even date herewith, by and
among Borrowers and Agent, setting forth certain fees payable by Borrowers
in
connection with the Credit Facility, as the same now exists or may hereafter
be
amended, modified, supplemented, extended, renewed, restated or
replaced.
1.53 "Financing
Agreements" shall mean, collectively, this Agreement, each Financing Order,
the
Fee Letter, the Affiliate Subordination Agreement, the Intercreditor Agreement
and all notes, guarantees, security agreements, deposit account control
agreements, investment property control agreements, intercreditor agreements
and
all other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by any Borrower or Guarantor in connection with this
Agreement.
1.54 "Financing
Order" shall mean the Permanent Financing Order and such other orders relating
thereto or authorizing the granting of credit by Agent and Lenders to Borrowers
on a permanent basis pursuant to Section 364 of the Bankruptcy Code as may
be
issued or entered by the Bankruptcy Court in the Chapter 11 Cases.
1.55 "Financing
Order Entry Date" means the date on which the Financing Order shall have been
entered by the Bankruptcy Court.
1.56 "Foreign
Lender" shall mean any Lender that is organized under the laws of a jurisdiction
other than that in which a Borrower is resident for tax purposes. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
1.57 "Funding
Bank" shall have the meaning given to such term in Section 3.3
hereof.
1.58 "GAAP"
shall mean generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute
of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of determination consistently applied.
1.59 "GOB
Stores" shall have the meaning set forth in the Final Order Under 11 U.S.C.
§§ 105, 327, 328, 365 and 554, (I) Authorizing Debtors to Conduct
Going-Out-Of-Business Sales And To Close Certain Stores, (II) Authorizing The
Assumption Of Consulting Agreement With And Retention Of Consultant And (III)
Granting Related Relief, dated April 5, 2007, as in effect on the date
hereof.
1.60 "Governmental
Authority" shall mean any nation or government, any state, province, or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.
12
1.61 "Guaranteed
Obligations" shall have the meaning set forth in Section 14.1
hereof.
1.62 "Guarantors"
shall mean, collectively, the following (together with their respective
successors and assigns): (a) HF Enterprises, Inc., a Delaware corporation,
a
debtor and debtor-in-possession; (b) HF Resources, Inc., a Delaware corporation,
a debtor and debtor-in-possession; and (c) any other Person that at any time
after the date hereof becomes party to a guarantee in favor of Agent or any
Lender or otherwise liable on or with respect to the Obligations or who is
the
owner of any property which is security for the Obligations (other than
Borrowers); each sometimes being referred to herein individually as a
"Guarantor".
1.63 "Guaranty"
means (i) the guaranty of each Guarantor party hereto contained in Section
14
hereof, and (ii) each other guaranty made by any other Guarantor in favor
of the Agent for the benefit of the Agent and the Lenders pursuant to Section
9.23 or otherwise.
1.64 "Hazardous
Materials" shall mean any hazardous, toxic or dangerous substances, materials
and wastes, including hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of pollutants
or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that
are
or become classified as hazardous or toxic under any Environmental
Law).
1.65 "Hedge
Agreement" shall mean an agreement between any Borrower or Guarantor and a
Bank
Product Provider (as defined in the Working Capital Loan Agreement as in effect
on the date hereof) that is a rate swap agreement, basis swap, forward rate
agreement, commodity swap, interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement, rate cap agreement, rate floor
agreement, rate collar agreement, currency swap agreement, cross-currency rate
swap agreement, currency option, any other similar agreement (including any
option to enter into any of the foregoing or a master agreement for any the
foregoing together with all supplements thereto) for the purpose of protecting
against or managing exposure to fluctuations in interest or exchange rates,
currency valuations or commodity prices; sometimes being collectively referred
to herein as "Hedge Agreements".
1.66 "Indebtedness"
shall mean, with respect to any Person, any liability, whether or not
contingent, (a) in respect of borrowed money (whether or not the recourse of
the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments; (b)
representing the balance deferred and unpaid of the purchase price of any
property or services (other than an account payable to a trade creditor (whether
or not an Affiliate) incurred in the ordinary course of business of such Person
and payable in accordance with customary trade practices); (c) all obligations
as lessee under leases which have been, or should be, in accordance with GAAP
recorded as Capital Leases; (d) any contractual obligation, contingent or
otherwise, of such Person to pay or be liable for the payment of any
indebtedness described in this definition of another Person, including, without
limitation, any such indebtedness, directly or indirectly guaranteed, or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations
and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker's acceptances, drafts
or
similar documents or instruments issued for such Person's account; (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar
13
agreements
and other agreements or arrangements designed to protect such person against
fluctuations in interest rates or currency or commodity values; (i) all
obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments; (j) indebtedness
of any partnership or joint venture in which such Person is a general partner
or
a joint venturer to the extent such Person is liable therefor as a result of
such Person's ownership interest in such entity, except to the extent that
the
terms of such indebtedness expressly provide that such Person is not liable
therefor or such Person has no liability therefor as a matter of law and (k)
the
principal and interest portions of all rental obligations of such Person under
any synthetic lease or similar off-balance sheet financing where such
transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP.
1.67 "Information
Certificate" shall mean, collectively, the Information Certificates of Borrowers
and Guarantors constituting Exhibit B hereto containing material information
with respect to Borrowers and Guarantors, their respective businesses and assets
provided by or on behalf of Borrowers and Guarantors to Agent in connection
with
the preparation of this Agreement and the other Financing Agreements and the
financing arrangements provided for herein.
1.68 "Intellectual
Property" shall mean, as to each Borrower and Guarantor, such Borrower's and
Guarantor's now owned and hereafter arising or acquired: patents,
patent rights, patent applications, copyrights, works which are the subject
matter of copyrights, copyright applications, copyright registrations,
trademarks, servicemarks, trade names, trade styles, trademark and service
xxxx
applications, and licenses and rights to use any of the foregoing and all
applications, registrations and recordings relating to any of the foregoing
as
may be filed in the United States Copyright Office, the United States Patent
and
Trademark Office or in any similar office or agency of the United States, any
State thereof, any political subdivision thereof or in any other country or
jurisdiction, together with all rights and privileges arising under applicable
law with respect to any Borrower's or Guarantor's use of any of the foregoing;
all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to xxx for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or servicemark, or the license of any trademark
or
servicemark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.
14
1.69 "Intercreditor
Agreement" shall mean the Intercreditor Agreement, dated as of the date hereof,
by and among Agent, Working Capital Agent and Borrowers and Guarantors, as
amended, supplemented or otherwise modified from time to time or as replaced
in
accordance with the terms thereof and hereof, which will provide for, among
other things, an agreement by Working Capital Agent to maintain at all times
Reserves in an aggregate amount equal to $17,500,000 plus the amount of the
Professional Expense Cap.
1.70 "Interest
Expense" shall mean, for any period, as to any Person, as determined in
accordance with GAAP, the total interest expense of such Person, whether paid
or
accrued during such period (including the interest component of Capital Leases
for such period), including, without limitation, discounts in connection with
the sale of any Accounts and bank fees, commissions, discounts and other fees
and charges owed with respect to letters of credit, banker's acceptances or
similar instruments.
1.71 "Interest
Period" shall mean for any Eurodollar Rate Loan, a period of approximately
one
(1), two (2), or three (3) months duration as any Borrower (or Administrative
Borrower on behalf of such Borrower) may elect, the exact duration to be
determined in accordance with the customary practice in the applicable
Eurodollar Rate market; provided, that, such Borrower (or Administrative
Borrower on behalf of such Borrower) may not elect an Interest Period which
will
end after the last day of the then-current term of this Agreement.
1.72 "Interest
Rate" shall mean,
(a) Subject
to clause (b) of this definition below:
(i) as
to
Prime Rate Loans, a rate equal to two (2%) percent per annum in excess of the
Prime Rate, and
(ii) as
to
Eurodollar Rate Loans, a rate equal to five (5%) percent per annum in excess
of
the Adjusted Eurodollar Rate (in each case, based on the London Interbank
Offered Rate applicable for the Interest Period selected by a Borrower, or
by
Administrative Borrower on behalf of such Borrower, as in effect two (2)
Business Days prior to the commencement of the Interest Period, whether such
rate is higher or lower than any rate previously quoted to any Borrower or
Guarantor).
(b) Notwithstanding
anything to the contrary contained herein, Agent may, at its option, and Agent
shall, at the direction of the Required Lenders, without notice, increase the
Interest Rate to the rate of five (5%) percent per annum in excess of the Prime
Rate for Prime Rate Loans and the rate of eight (8%) percent per annum in excess
of the Adjusted Eurodollar Rate for Eurodollar Rate Loans either for the period
(A) from and after the effective date of termination or non-renewal hereof
until
Agent and Lenders have received full and final payment of all outstanding and
unpaid Obligations which are not contingent and cash collateral or letter of
credit, as Agent may specify, in the amounts and on the terms required under
Section 13.1 hereof for contingent Obligations (notwithstanding entry of a
judgment against any Borrower or Guarantor) and (B) from and after the date
of
the occurrence of an Event of Default and for so long as such Event of Default
is continuing.
15
1.73 "Inventory"
shall mean, as to each Borrower and Guarantor, all of such Borrower's and
Guarantor's now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower or Guarantor as lessor; (b)
are
held by such Borrower or Guarantor for sale or lease or to be furnished under
a
contract of service; (c) are furnished by such Borrower or Guarantor under
a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.
1.74 "Investment"
shall have the meaning set forth in Section 9.10 hereof.
1.75 "Investment
Property Control Agreement" shall mean an agreement in writing, in form and
substance satisfactory to Working Capital Agent (or Agent, if applicable),
by
and among Working Capital Agent (or Agent, if applicable), any Borrower or
Guarantor (as the case may be) and any securities intermediary, commodity
intermediary or other person who has custody, control or possession of any
investment property of such Borrower or Guarantor acknowledging that such
securities intermediary, commodity intermediary or other person has custody,
control or possession of such investment property on behalf of Working Capital
Agent (or Agent, if applicable), that it will comply with entitlement orders
originated by Working Capital Agent (or Agent, if applicable), with respect
to
such investment property, or other instructions of Working Capital Agent (or
Agent, if applicable), and has such other terms and conditions as Working
Capital Agent (or Agent, if applicable) may require.
1.76 "Lenders"
shall mean the lenders who are signatories hereto as Lenders and other persons
made a party to this Agreement as a Lender in accordance with Section 13.7
hereof, and their respective successors and assigns; each sometimes being
referred to herein individually as a "Lender".
1.77 "Liabilities"
shall have the meaning set forth in Section 2.5 hereof.
1.78 "License
Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.79 "Loan"
shall mean, collectively, (i) the loan made by the Lenders to the Borrowers
on
the date hereof and (ii) the loan, if any, made by the Lenders to the Borrowers
on the Delayed Draw Loan Date, in each case pursuant to Section 2.1
hereof
1.80 "London
Interbank Offered Rate" shall mean, with respect to any Eurodollar Rate Loan
for
the Interest Period applicable thereto, the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic average of all such
rates.
1.81 "Material
Adverse Deviation" shall mean, as of any date of determination, a deviation
of
more than 25%, on a cumulative basis for the period from and after the first
day
of the Budget to and including such date, above the "net inflows/(outflows)"
line item set forth in the Budget for such period.
16
1.82 "Material
Adverse Effect" shall mean a material adverse effect on (a) the financial
condition, business, performance or operations of Borrowers; (b) the legality,
validity or enforceability of this Agreement or any of the other Financing
Agreements; (c) the legality, validity, enforceability, perfection or priority
of the security interests and liens of Agent upon the Collateral; (d) the
Collateral or its value; (e) the ability of any Borrower to repay the
Obligations or of any Borrower to perform its obligations under this Agreement
or any of the other Financing Agreements as and when to be performed; or (f)
the
ability of Agent or any Lender to enforce the Obligations or realize upon the
Collateral or otherwise with respect to the rights and remedies of Agent and
Lenders under this Agreement or any of the other Financing Agreements;
provided, that, the following shall not constitute a Material Adverse
Effect: (i) the commencement of the Chapter 11 Cases, (ii) the financial
condition of the Borrowers and Guarantors immediately prior to the Petition
Date
as disclosed to Agent and Lenders in writing, (iii) the delisting of the stock
of Parent or any of its Subsidiaries from the New York Stock Exchange, or (iv)
Borrowers closing of certain of their store locations either (A) with the prior
written consent of Agent with respect to such store closures or (B) to the
extent provided by Section 9.7(e) hereof.
1.83 "Material
Contract" shall mean (a) any contract or other agreement (other than the
Financing Agreements), written or oral, of any Borrower or Guarantor involving
monetary liability of or to any Person in an amount in excess of $5,000,000
in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which any Borrower or
Guarantor is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto would have a Material Adverse
Effect.
1.84 "Maturity
Date" shall mean shall have the meaning set forth in Section 13.1
hereof.
1.85 "Maximum
Credit" shall mean the amount of $17,500,000.
1.86 "Mortgage"
shall mean any mortgage or deed of trust by a Borrower or a Guarantor in favor
of Agent with respect to the Real Property and related assets of such Borrower,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.87 "Multiemployer
Plan" shall mean a "multi-employer plan" as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA
Affiliate or with respect to which any Borrower, Guarantor or any ERISA
Affiliate may incur any liability.
1.88 "Net
Cash Proceeds" shall mean (i) with respect to any disposition of assets by
any Person or any of its Subsidiaries, the amount of cash received (directly
or
indirectly) from time to time (whether as initial consideration or through
the
payment or disposition of deferred consideration) by or on behalf of such Person
or such Subsidiary, in connection therewith after deducting therefrom only
(A) the amount of any Indebtedness secured by any Lien permitted by Section
9.8 on any asset (other than Indebtedness assumed by the purchaser of such
asset) which is required to be, and is, repaid in connection with such
disposition (other than Indebtedness under this Agreement), (B) reasonable
expenses related thereto incurred by such Person or such Subsidiary in
connection therewith, (C) transfer taxes paid to any taxing authorities by
such Person or such Subsidiary in connection therewith, and (D) net income
taxes to be paid in connection with such disposition (after taking into account
any tax credits or deductions and any tax sharing arrangements) and
(ii) with respect to the issuance or incurrence of any Indebtedness by any
Person or any of its Subsidiaries, or the sale or issuance by any Person or
any
of its Subsidiaries of any shares of its Capital Stock, the aggregate amount
of
cash received (directly or indirectly) from time to time (whether as initial
consideration or through the payment or disposition of deferred consideration)
by or on behalf of such Person or such Subsidiary in connection therewith,
after
deducting therefrom only (A) reasonable expenses related thereto incurred
by such Person or such Subsidiary in connection therewith, (B) transfer taxes
paid by such Person or such Subsidiary in connection therewith and (C) net
income taxes to be paid in connection therewith (after taking into account
any
tax credits or deductions and any tax sharing arrangements); in each case of
clause (i) and (ii) to the extent, but only to the extent, that the amounts
so
deducted are (x) actually paid to a Person that, except in the case of
reasonable out-of-pocket expenses, is not an Affiliate of such Person or any
of
its Subsidiaries and (y) properly attributable to such transaction or to the
asset that is the subject thereof.
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1.89 "Nova"
shall mean NOVA Information Systems, Inc.
1.90 "Nova
Event" shall mean (i) the sending by Nova to Parent of the notice of
termination, dated March 2, 2007, with respect to the Processing Agreement,
(ii)
the extension of the date of termination of the Processing Agreement from time
to time and the amendment and continuation of the Processing Agreement, as
the
case may be, and (iii) the establishment of the $1,890,000 reserve held by
Nova
in accordance with the terms of the Processing Agreement (in such form as such
reserve may be held from time to time, including, without limitation, cash
on
deposit, certificate of deposit or letter of credit).
1.91 "Obligations"
shall mean the Loan and all other obligations, liabilities and indebtedness
of
every kind, nature and description owing by any or all of Borrowers to Agent
or
any Lender, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, arising under this Agreement or any of the other Financing
Agreements, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after
the
commencement of the Chapter 11 Cases or any other case with respect to such
Borrower under the Bankruptcy Code or any similar statute (including the payment
of interest and other amounts which would accrue and become due but for the
commencement of such case, whether or not such amounts are allowed or allowable
in whole or in part in such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, or secured or unsecured.
1.92 "Obligor"
shall mean any guarantor, endorser, acceptor, surety or other person liable
on
or with respect to the Obligations or who is the owner of any property which
is
security for the Obligations (including, without limitation, Guarantors), other
than Borrowers.
1.93 "Other
Taxes" shall have the meaning given to such term in Section 6.5
hereof.
18
1.94 "Owned
Store Real Properties" shall mean, collectively, the Real Properties of Parent
listed on Schedule 1.94 hereto.
1.95 "Parent"
shall mean Xxxxxxx Fabrics, Inc., a Delaware corporation, a debtor and
debtor-in-possession, and its successors and assigns.
1.96 "Participant"
shall mean any lender that acquires and holds a participation in the interest
of
any Lender in any portion of the Loan in conformity with the provisions of
Section 13.7 hereof governing participations.
1.97 "Participant
Register" shall have the meaning set forth in Section 13.7 hereof.
1.98 "Permanent
Financing Order" shall mean the final order of the Bankruptcy Court with respect
to the Borrowers and Guarantors, in form and substance satisfactory to Agent,
as
the same may be amended, modified or supplemented from time to time with the
express written joinder or consent of the Agent, the Required Lenders and the
Borrowers.
1.99 "Permitted
Dispositions" shall mean each of the following:
(a) sales
of
Inventory in the ordinary course of business and "going out of business" sales
of Inventory in connection with the closing of retail store locations permitted
by Section 9.7 of this Agreement;
(b) the
sale
or other disposition of Equipment (including worn-out or obsolete Equipment
or
Equipment no longer used or useful in the business of any Borrower or Guarantor)
so long as such sales or other dispositions do not involve Equipment having
an
aggregate fair market value in excess of $500,000 for all such Equipment
disposed of in any fiscal year of Borrowers or as Agent may otherwise
agree;
(c) sales
or
other dispositions by any Borrower of assets in connection with the closing
or
sale of a retail store location of such Borrower in the ordinary course of
such
Borrower's business which consist of Real Property Leasehold Interests in the
premises of such store, the Equipment and fixtures located at such premises
and
the books and records relating exclusively and directly to the operations of
such store; provided, that, as to each and all such sales and
closings, (i) after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing, (ii) such sale shall be on
commercially reasonable prices and terms in a bona fide arm's length
transaction, and (iii) with respect to the Real Property Leasehold Interests,
after the sale or disposition of the Real Property Leasehold Interests related
to the closing or sale of store locations of the Borrowers after the date
hereof, either (A) Agent shall have consented to such sale or disposition of
such Real Property Leasehold Interests or (B) such sale or disposition of such
Real Property Leasehold Interests shall be permitted in Section 9.7
hereof;
(d) the
sale
of any of the Owned Store Real Properties; provided, that, as to
such sale and closing, (i) Agent shall have received not less than ten (10)
Business Days prior written notice of such sale or closing, which notice shall
set forth in reasonable detail satisfactory to Agent, the parties to such sale,
the purchase price and the manner of payment thereof and such other information
with respect thereto as Agent may request, (ii) after giving effect thereto,
no
Default or Event of Default shall exist or have occurred and be continuing,
(iii) such sale shall be on commercially reasonable prices and terms in a
bona fide arm's length transaction;
19
(e) the
grant
by any Borrower or Guarantor after the date hereof of a non-exclusive license
to
any person for the use of any Intellectual Property consisting of trademarks
owned by such Borrower or Guarantor; provided, that, as to any such license,
each of the following conditions is satisfied, (i) such licenses shall be on
commercially reasonable prices and terms in a bona fide arms' length
transactions, (ii) the rights of the licensee shall be subject to the rights
of
Agent, and shall not adversely affect, limit or restrict the rights of Agent
to
use any Intellectual Property of a Borrower or Guarantor to sell or otherwise
dispose of any Inventory or other Collateral, (iii) Agent shall have received,
true, correct and complete copies of the executed license agreement, promptly
upon the execution thereof and (iv) as of the date of the grant of any such
license, and after giving effect thereto, no Default or Event of Default shall
exist or have occurred; and
(f) sales,
transfers and dispositions of assets of a Borrower to another Borrower or by
a
Guarantor or other Subsidiary of Parent to a Borrower or Guarantor, in each
case
to the extent permitted under Section 9.12 hereof.
1.100 "Permitted
Investments" shall mean each of the following:
(a) the
endorsement of instruments for collection or deposit in the ordinary course
of
business;
(b) Investments
in cash or Cash Equivalents, provided, that the terms and conditions of Section
5.2 hereof shall have been satisfied with respect to the deposit account,
investment account or other account in which such cash or Cash Equivalents
are
held;
(c) the
existing Investments of each Borrower and Guarantor as of the date hereof in
its
Subsidiaries, provided, that, no Borrower or Guarantor shall have
any further obligations or liabilities to make any capital contributions or
other additional investments or other payments to or in or for the benefit
of
any of such Subsidiaries;
(d) loans
and
advances by any Borrower or Guarantor to employees of such Borrower or Guarantor
not to exceed the principal amount of $250,000 in the aggregate at any time
outstanding for: (i) reasonably and necessary work-related travel or other
ordinary business expenses to be incurred by such employee in connection with
their work for such Borrower or Guarantor and (ii) reasonable and necessary
relocation expenses of such employees (including home mortgage financing for
relocated employees);
(e) stock
or
obligations issued to any Borrower or Guarantor by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to such Borrower or Guarantor in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person; provided, that, subject to the terms
of the Intercreditor Agreement, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Agent, upon Agent's
request, together with such stock power, assignment or endorsement by such
Borrower or Guarantor as Agent may request; and
20
(f) obligations
of account debtors to any Borrower or Guarantor arising from Accounts which
are
past due evidenced by a promissory note made by such account debtor payable
to
such Borrower or Guarantor; provided, that, subject to the terms
of the Intercreditor Agreement, promptly upon the receipt of the original of
any
such promissory note by such Borrower or Guarantor, such promissory note shall
be endorsed to the order of Agent by such Borrower or Guarantor and promptly
delivered to Agent as so endorsed.
1.101 "Permitted
Priority Liens" shall mean Liens permitted under clauses (d), (e), (f), (g),
(h), (i), (j), (l) and (n) of Section 9.8 hereof.
1.102 "Person"
or "person" shall mean any individual, sole proprietorship, partnership,
corporation (including any corporation which elects subchapter S status under
the Code), limited liability company, limited liability partnership, business
trust, unincorporated association, joint stock corporation, trust, joint venture
or other entity or any government or any agency or instrumentality or political
subdivision thereof.
1.103 "Petition
Date" shall mean the date of the commencement of the Chapter 11
Cases.
1.104 "Plan"
means an employee benefit plan (as defined in Section 3(3) of ERISA) which
any
Borrower or Guarantor sponsors, maintains, or to which it makes, is making,
or
is obligated to make contributions, or, in the case of a Multiemployer Plan,
has
made contributions at any time during the immediately preceding six (6) plan
years or with respect to which any Borrower or Guarantor may incur
liability.
1.105 "Prime
Rate" shall mean, on any date, the greater of (a) 8.25%, (b) the rate from
time
to time publicly announced by JPMorgan Chase Bank in New York, New York, or
its
successors, as its prime rate, whether or not such announced rate is the best
rate available at such bank or (c) the Federal Funds Rate in effect on such
day
plus one-half (1/2%) percent.
1.106 "Prime
Rate Loan" shall mean any Loan or portion thereof on which interest is payable
based on the Prime Rate in accordance with the terms thereof.
1.107 "Priority
Professional Expenses" means those Carve-Out Expenses entitled to a priority
as
set forth in sub-clause (ii) of the clause "first" of the definition of
the term "Agreed Administrative Expense Priorities".
1.108 "Processing
Agreement" shall mean the Merchant Processing Agreement, dated September 21,
2004, between Nova, Regions Bank and Parent, as the same now exists and may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced".
1.109 "Professional
Expense Cap" has the meaning specified in subclause (ii) of clause "first"
of
the definition of the term "Agreed Administrative Expense
Priorities".
1.110 "Projected
Information" shall have the meaning set forth in Section 4.1
hereof.
1.111 "Pro
Rata Share" shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender's Commitment and the
denominator of whch is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's portion of the Loan
and the denominator shall be the aggregate amount of the unpaid
Loan.
21
1.112 "Provision
for Taxes" shall mean an amount equal to all taxes imposed on or measured by
net
income, whether Federal, State, county or local, and whether foreign or
domestic, that are paid or payable by any Person in respect of any period in
accordance with GAAP.
1.113 "Ratification
Agreement" shall mean the Ratification and Amendment Agreement, dated as of
March 22, 2007, by and among Borrowers, Guarantors, Working Capital Agent and
Working Capital Lenders, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced in accordance
with the terms hereof.
1.114 "Rating
Agencies" shall have the meaning set forth in Section 2.5 hereof.
1.115 "Real
Property" shall mean all now owned and hereafter acquired real property of
each
Borrower and Guarantor, including Real Property Leasehold Interests, together
with all buildings, structures, and other improvements located thereon and
all
licenses, easements and appurtenances relating thereto, wherever located,
including the real property and related assets more particularly described
in a
Mortgage.
1.116 "Real
Property Leasehold Interests" shall have the meaning set forth in the definition
of "Collateral".
1.117 "Receivables"
shall mean all of the following now owned or hereafter arising or acquired
property of each Borrower and Guarantor: (a) all Accounts; (b) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (c) all payment
intangibles of such Borrower or Guarantor; (d) letters of credit,
indemnities, guarantees, security or other deposits and proceeds thereof issued
payable to any Borrower or Guarantor or otherwise in favor of or delivered
to
any Borrower or Guarantor in connection with any Account; or (e) all other
accounts, contract rights, chattel paper, instruments, notes, general
intangibles and other forms of obligations owing to any Borrower or Guarantor,
whether from the sale and lease of goods or other property, licensing of any
property (including Intellectual Property or other general intangibles),
rendition of services or from loans or advances by any Borrower or Guarantor
or
to or for the benefit of any third person (including loans or advances to any
Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated
with any Accounts, Inventory or general intangibles of any Borrower or Guarantor
(including, without limitation, choses in action, causes of action, tax refunds,
tax refund claims, any funds which may become payable to any Borrower or
Guarantor in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to any Borrower or Guarantor from
any
Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which
any
Borrower or Guarantor is a beneficiary).
22
1.118 "Records"
shall mean, as to each Borrower and Guarantor, all of such Borrower's and
Guarantor's present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and
other
data relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of any Borrower or Guarantor with respect to the foregoing maintained
with or by any other person).
1.119 "Register"
shall have the meaning set forth in Section 13.7 hereof.
1.120 "Registered
Loan" shall have the meaning set forth in Section 2.1(d) hereof.
1.121 "Registered
Note" shall have the meaning set forth in Section 13.7 hereof.
1.122 "Related
Fund" shall mean, with respect to any Person, an Affiliate of such Person,
or a
fund or account managed by such Person or an Affiliate of such
Person.
1.123 "Required
Lenders" shall mean, at any time, those Lenders whose Pro Rata Shares aggregate
more than fifty (50%) percent of the aggregate of the Commitments of all
Lenders, or if the Commitments shall have been terminated, Lenders to whom
more
than fifty (50%) percent of the then outstanding Obligations are
owing.
1.124 "Restricted
Payment" shall mean (a) any cash dividend or other cash distribution, direct
or
indirect, on account of any shares of any class of Capital Stock of Parent
or
any of its Subsidiaries, as the case may be, now or hereafter outstanding,
(b)
any redemption, retirement, sinking fund or similar payment on account of,
or
purchase or other acquisition for value, direct or indirect, of any shares
of
any class of Capital Stock of Parent or any of its Subsidiaries, except for
any
redemption, retirement, sinking funds or similar payment payable solely in
such
shares of that class of stock or in any class of stock junior to that class,
(c)
any cash payment made to redeem, purchase, repurchase or retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire
any shares of any class of Capital Stock of Parent or any of its Subsidiaries
now or hereafter outstanding, or (d) any payment to any Affiliate of any
Borrower except to the extent expressly permitted in this
Agreement.
1.125 "Secured
Parties" shall mean, collectively, (i) Agent, and (ii) Lenders.
1.126 "Securitization"
shall have the meaning set forth in Section 2.5 hereof.
1.127 "Securitization
Parties" shall have the meaning set forth in Section 2.5 hereof.
1.128 "Special
Agent Advances" shall have the meaning set forth in Section 12.11
hereof.
23
1.129 "Subordinated
Debt Documents" shall mean, collectively, any and all agreements, documents
and
instruments evidencing or otherwise related to Indebtedness permitted under
Section 9.9(f) hereof.
1.130 "Subsidiary"
or "subsidiary" shall mean, with respect to any Person, any corporation, limited
liability company, limited liability partnership or other limited or general
partnership, trust, association or other business entity of which an aggregate
of at least a majority of the outstanding Capital Stock or other interests
entitled to vote in the election of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting power by reason
of
the happening of any contingency), managers, trustees or other controlling
persons, or an equivalent controlling interest therein, of such Person is,
at
the time, directly or indirectly, owned by such Person and/or one or more
subsidiaries of such Person.
1.131 "Taxes"
shall have the meaning set forth in Section 6.5 hereof.
1.132 "UCC"
shall mean the Uniform Commercial Code as in effect in the State of New York
and
any successor statute, as in effect from time to time (except that terms used
herein which are defined in the Uniform Commercial Code as in effect in the
State of New York on the date hereof shall continue to have the same meaning
notwithstanding any replacement or amendment of such statute except as Agent
may
otherwise determine).
1.133 "Voting
Stock" shall mean with respect to any Person, (a) one (1) or more classes of
Capital Stock of such Person having general voting powers to elect at least
a
majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.
1.134 "Wachovia"
shall mean Wachovia Bank, National Association, in its individual capacity,
and
its successors and assigns.
1.135 "W/C
Loans" shall mean the term "Loans" as defined in the Working Capital Loan
Agreement as in effect on the date hereof.
1.136 "Working
Capital Agent" shall mean Wachovia, in its capacity as administrative agent
acting for and on behalf of the Working Capital Lenders pursuant to the Working
Capital Loan Agreement, and its successors and assigns (including any
replacement or successor agent or additional agent acting for and on behalf
of
the Working Capital Lenders).
1.137 "Working
Capital Debt" shall mean all obligations, liabilities and indebtedness of every
kind, nature and description owing by any Borrower or Guarantor to Working
Capital Agent or any Working Capital Lender, including principal, interest,
charges, fees, premiums, indemnities, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, arising under
the Working Capital Lender Agreements.
24
1.138 "Working
Capital Lender Agreements" shall mean, collectively, the following (as the
same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced): (a) the Working Capital Loan
Agreement; (b) the agreements, documents and instruments set forth on Schedule
1.138 hereto; and (c) all other agreements, documents and instruments at any
time executed and/or delivered by any Borrower or Guarantor with, to or in
favor
of Working Capital Agent or any Working Capital Lender in connection therewith
or related thereto; sometimes being referred to herein individually as a
"Working Capital Lender Agreement".
1.139 "Working
Capital Lenders" shall mean, collectively, Wachovia and the other lenders who
are from time to time parties to the Working Capital Loan Agreement as lenders,
and their respective successors and assigns and the lenders with respect to
any
Refinancing Indebtedness; each sometimes referred to herein individually as
a
"Working Capital Lender".
1.140 "Working
Capital Loan Agreement" shall mean the Loan and Security Agreement, dated as
of
June 29, 2005, by and among Wachovia, as administrative agent, Wachovia Capital
Markets, LLC, as Sole Lead Arranger, Manager and Bookrunner, The CIT
Group/Business Credit, Inc., as syndication agent, the lenders from time to
time
party thereto, Borrowers and Guarantors, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, refinanced, restated
or
replaced, including, as amended by the Ratification Agreement, and including
any
agreements with respect to Refinancing Indebtedness.
1.141 "Working
Capital Maximum Credit" shall mean the term "Maximum Credit" as defined in
the
Working Capital Loan Agreement as in effect on the date hereof.
SECTION
2. CREDIT
FACILITIES
2.1 Loans.
(a) On
the
date hereof, each Lender severally (and not jointly) agrees to fund its Pro
Rata
Share of a Loan to the Borrowers, in the original principal amount of such
Lender's Commitment; provided, that if the conditions precedent set forth
in Section 4.2 hereof have not been satisfied as of the date hereof, then (x)
on
the date hereof, each Lender shall fund its Pro Rata Share of a Loan in an
aggregate amount of $12,500,000 and (y) on the date the conditions precedent
set
forth in Section 4.2 are satisfied (the "Delayed Draw Loan Date), each Lender
shall fund its Pro Rata Share of a Loan in an aggregate amount of $5,000,000
(the "Delayed Draw Loan").
(b) The
Loan
is (i) to be repaid, together with interest and other amounts, in accordance
with this Agreement and (ii) secured by all of the Collateral. The
unpaid principal amount of the Loan shall be repaid on the earlier of (i) the
Maturity Date as set forth in Section 13.1 hereof, and (ii) such earlier date
on
which the Loan shall be come due and payable in accordance with the terms of
this Agreement and the other Financing Agreements.
(c) Borrowers
may, upon at least five (5) Business Days' prior written notice to Agent, prepay
(without penalty or premium) the principal of the Loan, in whole or in
part. Each prepayment made pursuant to this clause (c) shall be
accompanied by the payment of accrued interest to the date of such payment
on
the amount prepaid.
25
(d) Agent,
on
behalf of Borrowers, agrees to record each Loan on the Register referred to
in
Section 13.7(b). The Loan recorded on the Register (the "Registered
Loan") may not be evidenced by promissory notes other than a Registered Note
(as
defined below). Upon the registration of a Loan, any promissory note
(other than a Registered Note) evidencing the same shall be null and void and
shall be returned to Borrowers. Borrowers agree, at the request of
any Lender, to execute and deliver to such Lender a promissory note in
registered form to evidence such Registered Loan (i.e., containing registered
note language) and registered as provided in Section 13.7(b) hereof (a
"Registered Note"), payable to such Lender and otherwise duly
completed. Once recorded on the Register, a Registered Note may not
be removed from the Register so long as the Obligations it evidences remain
outstanding, and a Registered Note may not be exchanged for a promissory note
that is not a Registered Note.
2.2 Commitments. Each
Lender's Commitment shall terminate at 5:00 p.m. (New York Time) (i) on the
date hereof, in an amount equal to each Lender's Pro Rata Share of the Loan
made
on the date hereof and (ii) if the Loan made on the date hereof is less than
$17,500,000, in an amount equal to each Lender's Pro Rata Share of the
Commitment in an aggregate amount of $5,000,000 on the Delayed Draw Loan
Date.
2.3 Mandatory
Prepayments. Notwithstanding the provisions of Section 6.4 hereof
and subject to the terms of the Intercreditor Agreement, so long as no Event
of
Default exists or has occurred and is continuing:
(a) Upon
the
sale or disposition of any Collateral by Parent or any of its Subsidiaries,
Borrowers shall immediately prepay the Working Capital Debt and the Obligations
as follows, in an aggregate amount equal to 100% of the Net Cash Proceeds
received by such Person in connection with such sale or disposition: (i) with
the Net Cash Proceeds received from the sale of the Real Property Leasehold
Interests to the outstanding principal amount of the Loan, until paid in full,
provided, that at the election of the Agent and Required Lenders such Net Cash
Proceeds shall instead be applied, first, to the outstanding principal
amount of the W/C Loans, until paid in full, and second, to the
outstanding principal amount of the Loan, until paid in full, and (ii) with
all
Net Cash Proceeds other than Net Cash Proceeds received from the sale of the
Real Property Leasehold Interests, first, to the outstanding principal
amount of the W/C Loans, until paid in full, and second, to the
outstanding principal amount of the Loan, until paid in full. Nothing
contained in this subsection (a) shall permit Parent or any of its Subsidiaries
to make a disposition of any property other than in accordance with Section
9.7.
(b) Notwithstanding
the foregoing, if Working Capital Agent does not require Borrowers to make
any
payment that, pursuant to the terms of this Section 2.3, is permitted to be
applied to the Working Capital Debt, such payment shall be applied to prepay
the
outstanding principal amount of the Loan instead.
(c) Notwithstanding
anything to the contrary in this Section 2.3, all prepayments under this Section
2.3 shall be accompanied by accrued interest on the principal amount being
prepaid to the date of prepayment. At any time that an Event of
Default has occurred and is continuing, all payments pursuant to this Section
2.3 shall be applied in accordance with Section 6.4.
26
2.4 Joint
and Several Liability. Each Borrower shall be jointly and
severally liable for all amounts due to Agent and Lenders under this Agreement
and the other Financing Agreements, regardless of which Borrower actually
receives the Loan hereunder or the amount of such Loan received or the manner
in
which Agent or any Lender accounts for the Loan or other extensions of credit
on
its books and records. All references herein or in any of the other
Financing Agreements to any of the obligations of Borrowers to make any payment
hereunder or thereunder shall constitute joint and several obligations of
Borrowers. The Obligations with respect to the Loan made to a
Borrower, and the Obligations arising as a result of the joint and several
liability of a Borrower hereunder, with respect to the Loan made to another
Borrower, shall be separate and distinct obligations, but all such other
Obligations shall be primary obligations of all Borrowers. The
Obligations arising as a result of the joint and several liability of a Borrower
hereunder with respect to the Loan or other extensions of credit made to each
other Borrower shall, to the fullest extent permitted by law, be unconditional
irrespective of (a) the validity or enforceability, avoidance or subordination
of the Obligations of such other Borrower or of any promissory note or other
document evidencing all or any part of the Obligations of such other Borrower,
(b) the absence of any attempt to collect the Obligations from such Borrower,
any Obligor or any other security therefor, or the absence of any other action
to enforce the same, (c) the waiver, consent, extension, forbearance or granting
of any indulgence by Agent or any Lender with respect to any provisions of
any
instrument evidencing the Obligations of such other Borrower, or any part
thereof, or any other agreement now or hereafter executed by the other Borrower
and delivered to Agent or any Lender, (d) the failure by Agent or any Lender
to
take any steps to perfect and maintain its security interest in, or to preserve
its rights and maintain its security or collateral for the Obligations of such
other Borrower, (e) the election of Agent and Lenders in any proceeding
instituted under the Bankruptcy Code, of the application of Section 1111(b)(2)
of the Bankruptcy Code, (f) the disallowance of all or any portion of the
claim(s) of Agent or any Lender for the repayment of the Obligations of such
other Borrower under Section 502 of the Bankruptcy Code, or (g) any other
circumstances which might constitute a legal or equitable discharge or defense
of an Obligor or of such other Borrower. With respect to the
Obligations arising as a result of the joint and several liability of a Borrower
hereunder with respect to the Loan or other extensions of credit made to another
Borrower hereunder, each Borrower waives, until the Obligations shall have
been
paid in full and this Agreement shall have been terminated, any right to enforce
any right of subrogation or any remedy which Agent or any Lender now has or
may
hereafter have against any Borrower or Obligor and any benefit of, and any
right
to participate in, any security or collateral given to Agent or any
Lender. At any time an Event of Default exists or has occurred and is
continuing, Agent may proceed directly and at once, without notice, against
any
Borrower to collect and recover the full amount, or any portion of the
Obligations, without first proceeding against the other Borrower or any other
Person, or against any security or collateral for the
Obligations. Each Borrower consents and agrees that Agent and Lenders
shall be under no obligation to marshal any assets in favor of any Borrower
or
against or in payment of any or all of the Obligations.
2.5 Securitization. The
Borrowers and Guarantors hereby acknowledge that the Lenders and their
Affiliates may sell or securitize the Loan (a "Securitization")
through the pledge of the Loan as collateral security for loans to the Lenders
or their Affiliates or through the sale of the Loan or the issuance of direct
or
indirect interests in the Loan, which loans to the Lenders or their Affiliates
or direct or indirect interests will be rated by Xxxxx'x, Standard & Poor's
or one or more other rating agencies (the "Rating
Agencies"). The Borrowers and Guarantors shall cooperate with the
Lenders and their Affiliates to effect the Securitization including, without
limitation, by (a) amending this Agreement and the other Financing
Agreements, and executing such additional documents, as reasonably requested
by
the Lenders in connection with the Securitization, providedthat
(i) any such amendment or additional documentation does not impose material
additional costs on the Borrowers and Guarantors and (ii) any such
amendment or additional documentation does not materially adversely affect
the
rights, or materially increase the obligations, of Borrowers and Guarantors
under the Financing Agreements or change or affect in a manner adverse to the
Borrowers and Guarantors the financial terms of the Loan, (b) providing
such information as may be reasonably requested by the Lenders in connection
with the rating of the Loan or the Securitization, and (c) providing in
connection with any rating of the Loan a certificate (i) agreeing to
indemnify the Lenders and their Affiliates, any of the Rating Agencies, or
any
party providing credit support or otherwise participating in the Securitization
(collectively, the "Securitization Parties") for any losses, claims,
damages or liabilities (the "Liabilities") to which the Lenders,
their Affiliates or such Securitization Parties may become subject insofar
as
the Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact by any Borrower or Guarantor contained
in
any Financing Agreement or in any writing delivered by or on behalf of any
Borrower or Guarantor to the Lenders in connection with any Financing Agreement
or arise out of or are based upon the omission or alleged omission by any
Borrower or Guarantor to state therein a material fact required to be stated
therein, or necessary in order to make the statements therein, in light of
the
circumstances under which they were made, not misleading, and such indemnity
shall survive any transfer by the Lenders or their successors or assigns of
the
Loan and (ii) agreeing to reimburse the Lenders and their Affiliates for
any legal or other expenses reasonably incurred by such Persons in connection
with defending the Liabilities.
27
SECTION
3. INTEREST
AND FEES
3.1 Interest.
(a) Borrowers
shall pay to Agent, for the benefit of Lenders, interest on the outstanding
principal amount of the Loan at the Interest Rate. All interest
accruing hereunder on and after the date of any Event of Default or termination
hereof shall be payable on demand.
(b) Each
Borrower (or Administrative Borrower on behalf of such Borrower) may from time
to time request Eurodollar Rate Loans or may request that Prime Rate Loans
be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from a
Borrower (or Administrative Borrower on behalf of such Borrower) shall specify
the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans
to
be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate
Loans
to be continued (subject to the limits set forth below) and the Interest Period
to be applicable to such Eurodollar Rate Loans. Subject to the terms
and conditions contained herein, three (3) Business Days after receipt by Agent
of such a request from a Borrower (or Administrative Borrower on behalf of
such
Borrower), such Eurodollar Rate Loans shall be made or Prime Rate Loans shall
be
converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue,
as the case may be, provided, that, (i) no Default or Event of Default shall
exist or have occurred and be continuing, (ii) no party hereto shall have sent
any notice of termination of this Agreement, (iii) such Borrower (or
Administrative Borrower on behalf of such Borrower) shall have complied with
such customary procedures as are established by Agent and specified by Agent
to
Administrative Borrower from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, and (vi) Agent and each Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available
to
Agent and such Lender and can be readily determined as of the date of the
request for such Eurodollar Rate Loan by such Borrower. Any request
by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime
Rate
Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate
Loans
shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Agent and Lenders shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Agent and Lenders had purchased such
deposits to fund the Eurodollar Rate Loans.
28
(c) Any
Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon
the
last day of the applicable Interest Period, unless Agent has received and
approved a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon
notice by Agent to Parent, be subsequently converted to Prime Rate Loans in
the
event that this Agreement shall terminate or not be
renewed. Borrowers shall pay to Agent, for the benefit of Lenders,
upon demand by Agent (or Agent may, at its option, charge any loan account
of
any Borrower) any amounts required to compensate any Lender or Participant
for
any loss (including loss of anticipated profits), cost or expense incurred
by
such person, as a result of the conversion of Eurodollar Rate Loans to Prime
Rate Loans pursuant to any of the foregoing.
(d) Interest
shall be payable by Borrowers to Agent, for the account of Lenders, monthly
in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual
days
elapsed. The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change
occurs. In no event shall charges constituting interest payable by
Borrowers to Agent and Lenders exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or provision of
this Agreement is in contravention of any such law or regulation, such part
or
provision shall be deemed amended to conform thereto.
3.2 Fees.
Borrowers shall pay to Agent the fees and amounts set forth in the Fee Letter
in
the amounts and at all times specified therein.
29
(a) If
after
the date hereof, either (i) any change in, or in the interpretation of, any
law
or regulation is introduced, including, without limitation, with respect to
reserve requirements, applicable to any Lender or any banking or financial
institution from whom any Lender borrows funds or obtains credit (a "Funding
Bank"), or (ii) a Funding Bank or any Lender complies with any future guideline
or request from any central bank or other Governmental Authority or (iii) a
Funding Bank or any Lender determines that the adoption of any applicable law,
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation
or
administration thereof has or would have the effect described below, or a
Funding Bank or any Lender complies with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, and in the case of any event set forth in
this clause (iii), such adoption, change or compliance has or would have the
direct or indirect effect of reducing the rate of return on any Lender's capital
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration the Funding Bank's or Lender's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, and the
result of any of the foregoing events described in clauses (i), (ii) or (iii)
is
or results in an increase in the cost to any Lender of funding or maintaining
the Loan, then Borrowers and Guarantors shall from time to time upon demand
by
Agent pay to Agent additional amounts sufficient to indemnify such Lender
against such increased cost on an after-tax basis (after taking into account
applicable deductions and credits in respect of the amount
indemnified). A certificate as to the amount of such increased cost
shall be submitted to Administrative Borrower by Agent or the applicable Lender
and shall be conclusive, absent manifest error.
(b) If
prior
to the first day of any Interest Period, (i) Agent shall have determined in
good
faith (which determination shall be conclusive and binding upon Borrowers and
Guarantors) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Adjusted
Eurodollar Rate for such Interest Period, (ii) Agent has received notice from
the Required Lenders that the Adjusted Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect
the
cost to Lenders of making or maintaining Eurodollar Rate Loans during such
Interest Period, or (iii) Dollar deposits in the principal amounts of the
Eurodollar Rate Loans to which such Interest Period is to be applicable are
not
generally available in the London interbank market, Agent shall give telecopy
or
telephonic notice thereof to Administrative Borrower as soon as practicable
thereafter, and will also give prompt written notice to Administrative Borrower
when such conditions no longer exist. If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such Interest
Period shall be made as Prime Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as Eurodollar
Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each
outstanding Eurodollar Rate Loan shall be converted, on the last day of the
then-current Interest Period thereof, to Prime Rate Loans. Until such
notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall
be
made or continued as such, nor shall any Borrower (or Administrative Borrower
on
behalf of any Borrower) have the right to convert Prime Rate Loans to Eurodollar
Rate Loans.
30
(c) Notwithstanding
any other provision herein, if the adoption of or any change in any law, treaty,
rule or regulation or final, non-appealable determination of an arbitrator
or a
court or other Governmental Authority or in the interpretation or application
thereof occurring after the date hereof shall make it unlawful for Agent or
any
Lender to make or maintain Eurodollar Rate Loans as contemplated by this
Agreement, (i) Agent or such Lender shall promptly give written notice of such
circumstances to Administrative Borrower (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of such Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as
such
and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for such Lender
to make or maintain Eurodollar Rate Loans, such Lender shall then have a
commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is
requested and (iii) such Lender's Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Rate Loan occurs on a day which is not the last
day
of the then current Interest Period with respect thereto, Borrowers and
Guarantors shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.3(d) below.
(d) Borrowers
and Guarantors shall indemnify Agent and each Lender and to hold Agent and
each
Lender harmless from any loss or expense which Agent or such Lender may sustain
or incur as a consequence of (i) default by any Borrower in making a borrowing
of, conversion into or extension of Eurodollar Rate Loans after such Borrower
(or Administrative Borrower on behalf of such Borrower) has given a notice
requesting the same in accordance with the provisions of this Agreement, (ii)
default by any Borrower in making any prepayment of a Eurodollar Rate Loan
after
such Borrower has given a notice thereof in accordance with the provisions
of
this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans
on
a day which is not the last day of an Interest Period with respect
thereto. With respect to Eurodollar Rate Loans, such indemnification
may include an amount equal to the excess, if any, of (A) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or extended, for the period from the date of such prepayment or of such failure
to borrow, convert or extend to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or extend, the Interest Period
that would have commenced on the date of such failure) in each case at the
applicable rate of interest for such Eurodollar Rate Loans provided for herein
over (B) the amount of interest (as determined by such Agent or such Lender)
which would have accrued to Agent or such Lender on such amount by placing
such
amount on deposit for a comparable period with leading banks in the interbank
Eurodollar market. This covenant shall survive the termination or
non-renewal of this Agreement and the payment of the Obligations.
SECTION
4. CONDITIONS
PRECEDENT
The
obligation of Agent and Lenders to make the Loan hereunder is subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of the Loan of each of the following conditions precedent:
31
(a) the
Financing Order shall have been entered by the Bankruptcy Court and the Agent
shall have received a true and complete copy of such order, and such order
shall
be in full force and effect and shall not have been reversed, modified, amended,
stayed, vacated or subject to a pending appeal absent prior written consent
of
the Agent, the Required Lenders and Borrowers.
(b) all
requisite corporate action and proceedings in connection with this Agreement
and
the other Financing Agreements shall be satisfactory in form and substance
to
Agent, and Agent shall have received all information and copies of all
documents, including records of requisite corporate action and proceedings
which
Agent may have requested in connection therewith, such documents where requested
by Agent or its counsel to be certified by appropriate corporate officers or
Governmental Authority (and including a copy of the certificate of incorporation
or formation of each Borrower and Guarantor certified by the Secretary of State
(or equivalent Governmental Authority) which shall set forth the same complete
name of such Borrower or Guarantor as is set forth herein and such document
as
shall set forth the organizational identification number of each Borrower or
Guarantor, if one is issued in its jurisdiction of incorporation or
formation);
(c) Agent
shall have received a certificate of the appropriate official(s) of the states
of Delaware and Mississippi certifying as to the status of the good standing
of,
and the payment of taxes by, each Borrower or Guarantor in such states, to
the
extent that such Borrower or Guarantor is organized or qualified in such
states;
(d) after
giving effect to the Loan to be made on the date hereof and the payment of
all
fees and expenses related to this transaction, (i) the Excess Availability
plus unrestricted cash of Borrowers shall not be less than $22,500,000 and
(ii) all accounts payable of the Borrowers and Guarantors shall be at a
level satisfactory to Agent. The Administrative Borrower shall
deliver to the Collateral Agent a certificate of the chief financial officer
of
the Administrative Borrower certifying as to the matters set forth in clauses
(i) and (ii) above and containing the calculation of Excess
Availability.
(e) Agent
shall have received a Deposit Account Control Agreement by and among the Working
Capital Agent, duly authorized, executed and delivered by Parent and
BancorpSouth Bank, together with evidence satisfactory to Agent that such
Deposit Account Control Agreement has been ratified by the parties thereto
and
remains in full force and effect;
(f) Agent
shall have received evidence, in form and substance satisfactory to Agent,
that
Agent has a valid perfected first priority security interest in all of the
Collateral, subject (as to priority) only to Permitted Priority
Liens;
(g) Agent
shall have received and reviewed lien search results for each Borrower and
Guarantor in such jurisdictions as Agent shall request, which search results
shall be in form and substance satisfactory to Agent;
(h) Agent
shall have received copies of the stock certificates (if any) (the originals
having been delivered to the Working Capital Agent) representing all of the
issued and outstanding shares of the Capital Stock of each Borrower and
Guarantor (other than Parent) and owned by any Borrower or Guarantor, in each
case together with copies of the stock powers duly executed in blank with
respect thereto;
32
(i) Agent
shall have received evidence of insurance and loss payee endorsements required
hereunder and under the other Financing Agreements, in form and substance
satisfactory to Agent, and certificates of insurance policies and/or
endorsements naming Agent as loss payee;
(j) Agent
shall have received the Intercreditor Agreement, duly executed by the Working
Capital Agent, Borrowers and Guarantors;
(k) no
material pending or threatened, litigation, proceeding, bankruptcy or
insolvency, injunction, order or claims with respect to Borrowers and Guarantors
shall exist (other than (i) the commencement of the Chapter 11 Cases and events
that typically result from the commencement of the Chapter 11 Cases and (ii)
any
litigation that has been stayed by the commencement of the Chapter 11
Cases);
(l) as
of the
date hereof and after giving effect to the transactions contemplated hereby,
no
defaults or events of default on the Working Capital Debt and no Material
Contracts of Borrowers or Guarantors shall have terminated;
(m) Agent
shall have received, in form and substance satisfactory to Agent, such opinion
letters of counsel to Borrowers and Guarantors with respect to the Financing
Agreements and such other matters as Agent may request;
(n) the
other
Financing Agreements and all instruments and documents hereunder and thereunder
shall have been duly executed and delivered to Agent, in form and substance
satisfactory to Agent.
(o) all
representations and warranties contained herein and in the other Financing
Agreements shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as
of
the date of the making of the Loan and after giving effect thereto, except
to
the extent that such representations and warranties expressly relate solely
to
an earlier date (in which case such representations and warranties shall have
been true and accurate in all material respects on and as of such earlier
date);
(p) Borrowers
shall have prepared and delivered to Agent and Lenders, in form satisfactory
to
Agent, an initial thirteen (13) week Budget, together with a certificate of
an
authorized officer of the Administrative Borrower stating that such initial
Budget has been prepared on a reasonable basis and in good faith and is based
on
assumptions believed by the Borrowers to be reasonable at the time made and
from
the best information then available to the Borrowers; the initial Budget has
been throughly reviewed by the Borrowers and their management and sets forth
for
the periods covered thereby: (i) projected weekly operating cash receipts for
each week commencing with the week ending May 18, 2007, (ii) projected weekly
operating cash disbursements for each week commencing with the week ending
May
18, 2007, (iii) projected aggregate principal amount of outstanding loans and
letter of credit obligations for each week commencing with the week ending
as of
May 18, 2007, and (iv) projected weekly amounts of loans and letters of credit
available to Borrowers under the terms, conditions and formulae of this
Agreement and the Working Capital Loan Agreement for each week commencing with
the week ending May 18, 2007 (collectively, the "Projected
Information");
33
(q) Borrowers
shall have paid on or before the date of this Agreement all fees, costs,
expenses and taxes then payable pursuant to this Agreement and the other
Financing Agreements, including, without limitation, the Fee
Letter;
(r) Agent
shall have determined, in its sole judgment, that no event or development shall
have occurred since the Petition Date (other than the commencement of the
Chapter 11 Cases and events that typically result from the commencement of
the
Chapter 11 Cases) which could have a Material Adverse Effect;
(s) no
law,
regulation, order, judgment or decree of any Governmental Authority shall exist,
and no action, suit, investigation, litigation or proceeding shall be pending
or
threatened in any court or before any arbitrator or Governmental Authority,
which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the
making of the Loan, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has
or
has a reasonable likelihood of having a Material Adverse Effect (other than
the
commencement of the Chapter 11 Cases and events that typically result from
the
commencement of the Chapter 11 Cases);
(t) Agent
shall have received executed copies of the Working Capital Lender Agreements
as
in effect on the date hereof, including, without limitation, the amendments
to
the Working Capital Lender Agreements and any orders entered by the Bankruptcy
Court which are required by Agent, which shall each be in form and substance
satisfactory to Agent, together with a certificate of an authorized officer
of
the Administrative Borrower stating that such agreements remain in full force
and effect and that none of the Borrowers or Guarantors has breached or
defaulted in any of its obligations under such agreements;
(u) no
trustee, examiner or receiver shall have been appointed or designated with
respect to Borrowers or their business, properties or assets and no motion
shall
be pending seeking any relief or seeking any other relief in the Bankruptcy
Court to exercise control over Collateral;
(v) no
Default or Event of Default shall exist or have occurred and be continuing
on
and as of the date of the making of the Loan and after giving effect
thereto;
(w) Agent
shall have received a certificate of an authorized officer of the Administrative
Borrower certifying as to the matters set forth in Sections 4.1(o) and (v);
and
(x) Agent
shall have received such other agreements, instruments, approvals, opinions
and
other documents, each satisfactory to Agent in form and substance, as Agent
may,
in its good faith judgment, determine to be necessary or
appropriate.
4.2 Conditions
Precedent to Delayed Draw Loan . The
obligation of Lenders to make the Delayed Draw Loan is subject to the further
satisfaction of, or waiver by the Agent of, immediately prior to or concurrently
with the making of such Delayed Draw Loan of each of the following conditions
precedent:
34
(a) all
representations and warranties contained herein and in the other Financing
Agreements shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on and as
of
the date of the making of such Delayed Draw Loan and after giving effect
thereto, except to the extent that such representations and warranties expressly
relate solely to an earlier date (in which case such representations and
warranties shall have been true and accurate in all material respects on and
as
of such earlier date);
(b) Agent
shall have completed its Delayed Draw Loan due diligence with respect to each
Borrower and Guarantor and received all financial information, projections,
budgets, business plans, cash flows and such other information as Agent and
Lenders shall reasonably request, including, without limitation, (i) a review
of
Borrowers' and Guarantors' books and records, (ii) a review of a valuation
of
Borrowers' and Guarantors' assets and business, including, without limitation,
an updated appraisal of the Borrowers' distribution facility, and a current
GOB
appraisal of inventory, (iii) an analysis of Borrowers' 2006 financial
statements indicating revenue and EBITDA of $388,488,000 and ($23,000,000),
respectively, (iv) satisfactory review of Borrowers' interim cash forecasts,
and
(v) receipt and review of and satisfaction with Borrowers' Budget, in each
case,
the results of which shall be acceptable to the Agent, in its sole and absolute
discretion;
(c) no
law,
regulation, order, judgment or decree of any Governmental Authority shall exist,
and no action, suit, investigation, litigation or proceeding shall be pending
or
threatened in any court or before any arbitrator or Governmental Authority,
which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the
making of the Delayed Draw Loan, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements
or
(ii) has or has a reasonable likelihood of having a Material Adverse Effect
(other than the commencement of the Chapter 11 Cases and events that typically
result from the commencement of the Chapter 11 Cases);
(d) no
Default or Event of Default shall exist or have occurred and be continuing
on
and as of the date of the making of such Delayed Loan and after giving effect
thereto;
(e) Agent
shall have received a certificate of an authorized officer of the Administrative
Borrower certifying as to the matters set forth in Sections 4.2(a) and (d);
and
(f) Borrowers
shall have paid, on or before the date of the making of the Delayed Draw
Loan, all fees, costs, expenses and taxes then payable pursuant to this
Agreement and the other Financing Agreements, including, without limitation,
the
Fee Letter.
SECTION
5. SECURITY
AND ADMINISTRATIVE PRIORITY
35
5.1 Collateral;
Grant of Lien and Security Interest.
(a) As
security for the full and timely payment and performance of all of the
Obligations, each of the Borrowers and the Guarantors hereby, as of the
Financing Order Entry Date, assigns, pledges and grants (or causes the
assignment, pledge and grant in respect of any indirectly owned assets) to
the
Agent, for the benefit of the Agent and the Lenders, a security interest in
and
to and Lien on all of the Collateral.
(b) Upon
entry of the Financing Order, the Liens and security interests in favor of
the
Agent referred to in Section 5.1(a) hereof shall be valid and perfected Liens
and security interests in the Collateral, prior to all other Liens and security
interests in the Collateral, other than for Permitted Priority Liens (and,
in
the case of the Working Capital Debt, subject to the terms of the Intercreditor
Agreement). Such Liens and security interests and their priority
shall remain in effect until all Obligations shall have been repaid in cash
in
full.
(c) Notwithstanding
anything herein to the contrary (i) all proceeds received by the Agent and
the Lenders from the Collateral subject to the Liens granted in this Section
5.1
and in each other Financing Agreement and by the Bankruptcy Court Orders shall
be subject to the prior payment of (x) Carve-Out Expenses to the extent set
forth in clause "first" of the definition of the term "Agreed
Administrative Expense Priorities", and (y) subject to the terms of the
Intercreditor Agreement, the Working Capital Debt, and (ii) no Person
entitled to such Carve-Out Expenses shall be entitled to sell or otherwise
dispose, or seek or object to the sale or other disposition, of any
Collateral.
5.2 Administrative
Priority. Each of the Borrowers and the Guarantors agrees for
itself that the Obligations of such Person shall constitute allowed
administrative expenses in the Chapter 11 Cases, having priority over all
administrative expenses of and unsecured claims against such Person now existing
or hereafter arising, of any kind or nature whatsoever, including, without
limitation, all administrative expenses of the kind specified in, or arising
or
ordered under, Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a),
507(b), 546(c), 726 and 1114 of the Bankruptcy Code, subject only to the (x)
prior payment of Carve-Out Expenses to the extent set forth in clause
"first" of the definition of the term "Agreed Administrative Expense
Priorities" and (y) subject to the terms of the Intercreditor Agreement, the
Working Capital Debt.
5.3 Grants,
Rights and Remedies. The Liens and security interests granted
pursuant to Section 5.1(a) hereof and the administrative priority granted
pursuant to Section 5.2 hereof may be independently granted by the Financing
Agreements and by other Financing Agreements hereafter entered
into. This Agreement, the Financing Order and such other Financing
Agreements supplement each other, and the grants, priorities, rights and
remedies of the Agent and the Lenders hereunder and thereunder are
cumulative.
5.4 No
Filings Required. The Liens and security interests referred to
herein shall be deemed valid and perfected by entry of the Financing Order,
and
entry of the Financing Order shall have occurred on or before the date of the
extension of the Loan. The Agent shall not be required to file any
financing statements, mortgages, certificates of title, notices of Lien or
similar instruments in any jurisdiction or filing office or to take any other
action in order to validate or perfect the Lien and security interest granted
by
or pursuant to this Agreement, the Financing Order, or any other Financing
Agreement; provided, that the Agent shall be permitted to file any
financing statements, mortgages, certificates of title, notices of Lien or
similar instruments in any jurisdiction or filing office or to take any other
action with respect to the Lien and security interest granted by or pursuant
to
this Agreement.
36
5.5 Survival. The
Liens, lien priority, administrative priorities and other rights and remedies
granted to the Agent and the Lenders pursuant to this Agreement, the Financing
Order and the other Financing Agreements (specifically including, but not
limited to, the existence, perfection and priority of the Liens and security
interests provided herein and therein, and the administrative priority provided
herein and therein) shall not be modified, altered or impaired in any manner
by
any other financing or extension of credit or incurrence of Indebtedness by
any
Borrower or Guarantor (pursuant to Section 364 of the Bankruptcy Code or
otherwise), or by any dismissal or conversion of any of the Chapter 11 Cases,
or
by any other act or omission whatsoever. Without limitation,
notwithstanding any such order, financing, extension, incurrence, dismissal,
conversion, act or omission:
(a) except
for the Carve-Out Expenses to the extent set forth in clause "first" or,
subject to the terms of the Intercreditor Agreement, the Working Capital Debt
in
clause "second" of the definition of the term "Agreed Administrative
Expense Priorities" as set forth in Section 5.2, no costs or expenses of
administration which have been or may be incurred in the Chapter 11 Cases or
any
conversion of the same or in any other proceedings related thereto, and no
other
priority claims, are or will be prior to or on parity with, any claim of the
Agent and the Lenders against any Borrower or Guarantor in respect of any
Obligation;
(b) the
Liens
in favor of the Agent and the Lenders set forth in Section 5.1(a) hereof shall
constitute valid and perfected first priority Liens and security interests,
subject only to Permitted Priority Liens (and, in the case of the Working
Capital Debt, subject to the terms of the Intercreditor Agreement) to which
such
Liens and security interests may be subordinate and junior, and shall be prior
to all other Liens and security interests, now existing or hereafter arising,
in
favor of any other creditor or any other Person whatsoever; and
(c) the
Liens
in favor of the Agent and the Lenders set forth herein and in the other
Financing Agreements shall continue to be valid and perfected without the
necessity that the Agent file financing statements, mortgages, certificates
of
title or otherwise perfect its Lien under applicable non-bankruptcy
law.
5.6 Further
Assurances. Borrowers and Guarantors shall take any other actions
reasonably requested by Agent from time to time to cause the attachment,
perfection and first priority of, and the ability of Agent to enforce, the
security interest of Agent in any and all of the Collateral, including, without
limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that any Borrower's or Guarantor's signature thereon
is required therefor, (ii) causing Agent's name to be noted as secured party
on
any certificate of title for a titled good if such notation is a condition
to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals of any
Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other
law,
as applicable in any relevant jurisdiction.
37
SECTION
6. COLLECTION
AND ADMINISTRATION
6.1 Borrowers'
Loan Accounts.
Agent
shall maintain one or more loan account(s) on its books in which shall be
recorded (a) the Loans and other Obligations and the Collateral, (b) all
payments made by or on behalf of any Borrower or Guarantor and (c) all other
appropriate debits and credits as provided in this Agreement, including fees,
charges, costs, expenses and interest. All entries in the loan
account(s) shall be made in accordance with Agent's customary practices as
in
effect from time to time.
6.2 Statements.
Agent
shall render to Administrative Borrower each month a statement setting forth
the
balance in the Borrowers' loan account(s) maintained by Agent for Borrowers
pursuant to the provisions of this Agreement, including principal, interest,
fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and Guarantors and
conclusively binding upon Borrowers and Guarantors as an account stated except
to the extent that Agent receives a written notice from Administrative Borrower
of any specific exceptions of Administrative Borrower thereto within thirty
(30)
days after the date such statement has been received by Parent. Until
such time as Agent shall have rendered to Administrative Borrower a written
statement as provided above, the balance in any Borrower's loan account(s)
shall
be presumptive evidence of the amounts due and owing to Agent and Lenders by
Borrowers and Guarantors.
6.3 Collection
of Accounts. Borrowers shall comply with all terms and provisions
of the Working Capital Loan Agreement (or any successor or replacement agreement
acceptable to Agent) with respect to the cash management of Borrowers; provided,
that if the Working Capital Loan Agreement shall have been terminated and
Borrowers shall not have entered into a successor or replacement agreement
acceptable to Agent, then Borrowers shall enter into control agreements, lockbox
agreements and other similiar agreements in form and substance satisfactory
to
Agent.
6.4 Payments.
(a) All
Obligations shall be payable to the Agent Payment Account or such other place
as
Agent may designate from time to time. Subject to the other terms and
conditions contained herein, Agent shall apply payments received or collected
from any Borrower or Guarantor or for the account of any Borrower or Guarantor
(including, subject to the terms and conditions of the Intercreditor Agreement,
the monetary proceeds of collections or of realization upon any Collateral)
as
follows: first, to pay any fees, indemnities or expense reimbursements then
due
to Agent and Lenders from any Borrower or Guarantor; second, to pay interest
due
in respect of the Loans (and including any Special Agent Advances); third,
to
pay principal in respect of Special Agent Advances; fourth, to pay principal
in
respect of the Loans; and fifth, to pay or prepay any other Obligations whether
or not then due, in such order and manner as Agent determines or to be held
as
cash collateral in a manner satisfactory to Agent and Borrowers or pursuant
to
an order of the Bankruptcy Court in connection with any contingent
Obligations. Notwithstanding anything to the contrary contained in
this Agreement, unless so directed by Agent, or unless a Default or an Event
of
Default shall exist or have occurred and be continuing, Agent shall not apply
any payments which it receives to any Eurodollar Rate Loans, except (A) on
the
expiration date of the Interest Period applicable to any such Eurodollar Rate
Loans or (B) in the event that there are no outstanding Prime Rate
Loans.
38
(b) At
Agent's option, all principal, interest, fees, costs, expenses and other charges
provided for in this Agreement or the other Financing Agreements may be charged
directly to the loan account(s) of any Borrower maintained by
Agent. If after receipt of any payment of, or proceeds of Collateral
applied to the payment of, any of the Obligations, Agent or any Lender is
required to surrender or return such payment or proceeds to any Person for
any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue
in
full force and effect as if such payment or proceeds had not been received
by
Agent or such Lender. Borrowers and Guarantors shall be liable to pay
to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the
amount of any payments or proceeds surrendered or returned. This
Section 6.4(b) shall remain effective notwithstanding any contrary action which
may be taken by Agent or any Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination of this Agreement.
6.5 Taxes.
(a) Except
as
otherwise provided in Section 6.5(d) herein, any and all payments by or on
account of any of the Obligations shall be made free and clear of and without
deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, charges,
withholdings, liabilities, restrictions or conditions of any kind, excluding
in
the case of each Lender and Agent, taxes measured by its net income, and
franchise taxes imposed on it, by the jurisdiction (or any political subdivision
thereof) under the laws of which such Lender or Agent (as the case may be)
is
organized (all such non-excluded taxes, levies, imposts, fees, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes").
(b) If
any
Taxes shall be required by law to be deducted from or in respect of any sum
payable in respect of the Obligations to any Lender or Agent (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 6.5), such Lender or Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the relevant Borrower or Guarantor shall make such deductions, (iii) the
relevant Borrower or Guarantor shall pay the full amount deducted to the
relevant taxing authority or other authority in accordance with applicable
law
and (iv) the relevant Borrower or Guarantor shall deliver to Agent evidence
of
such payment.
(c) In
addition, each Borrower and Guarantor agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction, and all liabilities with respect thereto,
in
each case arising from any payment made hereunder or under any of the other
Financing Agreements or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any of the other Financing
Agreements (collectively, "Other Taxes").
39
(d) Each
Borrower and Guarantor shall indemnify each Lender and Agent for the full amount
of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this Section 6.5) paid by such Lender
or
Agent (as the case may be) and any liability (including for penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days from the date such Lender
or Agent (as the case may be) makes written demand therefor. A
certificate as to the amount of such payment or liability delivered to
Administrative Borrower by a Lender (in each case with a copy to Agent) or
by
Agent on its own behalf or on behalf of a Lender, shall be conclusive absent
manifest error. No Borrower or Guarantor shall be required to
indemnify or pay additional amounts to any Lender or Agent in respect of United
States Federal withholding tax pursuant to this Section 6.5 to the extent that
(i) the obligation to withhold amounts with respect to United States Federal
withholding tax existed on the date such Lender or Agent became a party to
this
Agreement or, with respect to payments to a newly designated lending office
of
any Lender (a "New Lending Office"), the date such Lender designated such New
Lending Office with respect to a Loan; provided, however, that
this clause (i) shall not apply to the extent the indemnity payment or
additional amounts that any assignee, or Lender (or assignee) through a New
Lending Office, would be entitled to receive (without regard to this clause
(i))
do not exceed the indemnity payment or additional amounts that the person making
the transfer, or Lender (or assignee) making the designation of such New Lending
Office, would have been entitled to receive in the absence of such transfer
or
designation, (ii) with respect to a Foreign Lender, the obligation to pay such
indemnity payment or additional amounts would not have arisen but for a failure
by a Foreign Lender to comply with paragraph (h) of this Section 6.5 or (iii)
the obligation to withhold amounts with respect to United States Federal
withholding tax did not arise as a result of a change in law (including any
interpretation thereof) occurring after the date hereof.
(e) If
Agent
or any Lender receives a refund in respect of any Taxes or Other Taxes for
which
Agent or such Lender has received payment from any Borrower or Guarantor
hereunder, so long as no Event of Default shall exist or have occurred and
be
continuing, Agent or such Lender (as the case may be) shall credit to the loan
account of Borrowers the amount of such refund net of all out-of-pocket expenses
of such Lender; provided, however, that if Agent or such Lender is
required to return such refund to the applicable Governmental Authority,
Borrower or Guarantor, as applicable, shall return such refund to Agent or
such
Lender, and Borrower or Guarantor shall pay any interest, additions to tax
or
penalties imposed by such Governmental Authority with respect
thereto.
(f) As
soon
as practicable after any payment of Taxes or Other Taxes by any Borrower or
Guarantor, such Borrower or Guarantor shall furnish to Agent, at its address
referred to herein, the original or a certified copy of a receipt evidencing
payment thereof.
40
(g) Without
prejudice to the survival of any other agreements of any Borrower or Guarantor
hereunder or under any of the other Financing Agreements, the agreements and
obligations of such Borrower or Guarantor contained in this Section 6.5 shall
survive the termination of this Agreement and the payment in full of the
Obligations.
(h) Any
Foreign Lender that is entitled to an exemption from or reduction of withholding
tax under the law of the jurisdiction in which the applicable Borrower is
resident for tax purposes, or any treaty to which such jurisdiction is a party,
with respect to payments hereunder or under any of the other Financing
Agreements shall deliver to Agent, at the time or times prescribed by applicable
law or reasonably requested by Agent (in such number of copies as is reasonably
requested by Agent), whichever of the following is applicable (but only if
such
Foreign Lender is legally entitled to do so): (i) duly completed
copies of Internal Revenue Service Form W-8BEN or W-8IMY claiming exemption
from, or a reduction to, withholding tax under an income tax treaty, or any
successor form, (ii) duly completed copies of Internal Revenue
Service Form W-8ECI or any successor form claiming exemption from withholding
because the income is effectively connected with a U.S. trade or business,
or
(iii) any other applicable form, certificate or document prescribed by
applicable law as a basis for claiming exemption from, or a reduction in, United
States withholding tax duly completed together with such supplementary
documentation as may be prescribed by applicable law to permit a Borrower to
determine the withholding or deduction required to be made. In the
case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Sections 871(h) or 881(c) of the Code, such Foreign Lender hereby
represents and warrants that such Foreign Lender is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code, a "10 percent shareholder" of
a
Borrower within the meaning of Section 881(c)(3)(B) of the Code or a "controlled
foreign corporation" described in Section 881(c)(3)(C) of the Code, and such
Foreign Lender agrees that it shall promptly notify Agent in the event any
such
representation is no longer accurate and will deliver such forms as may be
requested by Agent in order to confirm or establish the continued entitlement
of
such Foreign Lender to any such expemption from, or reduction in, United States
withholding tax with respect to payments hereunder or under the other Financing
Agreements. Unless Agent has received forms or other documents
satisfactory to it indicating that payments hereunder or under any of the other
Financing Agreements to or for a Foreign Lender are not subject to United States
withholding tax or are subject to such tax at a rate reduced by an applicable
tax treaty, Agent shall withhold amounts required to be withheld by applicable
requirements of law from such payments at the applicable statutory
rate.
6.6 Authorization
to Make Loans. The
Loans
under this Agreement shall be conclusively presumed to have been made to, and
at
the request of and for the benefit of, any Borrower or Guarantor when deposited
to the credit of any Borrower or Guarantor or otherwise disbursed or established
in accordance with the terms and conditions of this Agreement.
6.7 Use
of
Proceeds. Borrowers
shall use the proceeds of the Loan only for: (a) for general operating purposes,
working capital purposes and other proper corporate purposes of Borrowers and
Guarantors not otherwise prohibited by the terms hereof and (b) costs, expenses
and fees in connection with the preparation, negotiation, execution and delivery
of this Agreement and the other Financing Agreements. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing
or
carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause the Loan to be considered
a
"purpose credit" within the meaning of Regulation U of the Board of Governors
of
the Federal Reserve System, as amended. Notwithstanding anything to
the contrary contained in this Agreement and the other Financing Agreements,
unless authorized by the Bankruptcy Court and approved by Agent in writing,
no
portion of any claims against any Borrower or Guarantor existing or created
prior to the Petition Date, or of any administrative expense claim or other
claim relating to the Chapter 11 Cases, shall be paid with the proceeds of
the
Loan provided by Agent and Lenders to Borrowers, other than allowed professional
fees or such fees contained in the Financing Agreements and the Financing Order
and those administrative expense claims and other claims relating to the Chapter
11 Cases directly attributable to the post-petition operation of the business
of
any Borrower or Guarantor in the ordinary course of such business in accordance
with the Financing Agreements. Notwithstanding anything to the
contrary contained in this Section 6.7 or otherwise, such proceeds shall not
be
used by Borrowers or Guarantors to affirmatively commence or support, or to
pay
any professional fees incurred in connection with, any adversary proceeding,
motion, or other action that seeks to challenge, contest or otherwise seek
to
impair or object to the validity, extent, enforceability or priority of Agent's
and Lenders' Liens, claims and rights.
41
6.8 Appointment
of Administrative Borrower as Agent for Requesting Loan and Receipts of Loan
and
Statements.
(a) Each
Borrower hereby irrevocably appoints and constitutes Administrative Borrower
as
its agent and attorney-in-fact to request and receive the Loan pursuant to
this
Agreement and the other Financing Agreements from Agent or any Lender in the
name or on behalf of such Borrower. Agent and Lenders may disburse
the Loan to such bank account of Administrative Borrower or a Borrower or
otherwise make the Loan to a Borrower and provide the Loan to a Borrower as
Administrative Borrower may designate or direct, without notice to any other
Borrower or Guarantor. Notwithstanding anything to the contrary
contained herein, Agent may at any time and from time to time require that
the
Loan to or for the account of any Borrower be disbursed directly to an operating
account of such Borrower.
(b) Administrative
Borrower hereby accepts the appointment by Borrowers to act as the agent and
attorney-in-fact of Borrowers pursuant to this Section 6.8. Administrative
Borrower shall ensure that the disbursement of the Loan to each Borrower
requested by or paid to or for the account of Borrowers, shall be paid to or
for
the account of such Borrower.
(c) Each
Borrower and other Guarantor hereby irrevocably appoints and constitutes
Administrative Borrower as its agent to receive statements on account and all
other notices from Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.
(d) Any
notice, election, representation, warranty, agreement or undertaking by or
on
behalf of any other Borrower or any Guarantor by Administrative Borrower shall
be deemed for all purposes to have been made by such Borrower or Guarantor,
as
the case may be, and shall be binding upon and enforceable against such Borrower
or Guarantor to the same extent as if made directly by such Borrower or
Guarantor.
42
(e) No
purported termination of the appointment of Administrative Borrower as agent
as
aforesaid shall be effective, except after ten (10) days' prior written notice
to Agent.
6.9 Pro
Rata Treatment. Except
to
the extent otherwise provided in this Agreement or as otherwise agreed by
Lenders: (a) the making and conversion of Loan shall be made among
the Lenders based on their respective Pro Rata Shares as to the Loan and (b)
each payment on account of any Obligations to or for the account of one or
more
of Lenders in respect of any Obligations due on a particular day shall be
allocated among the Lenders entitled to such payments based on their respective
Pro Rata Shares and shall be distributed accordingly.
6.10 Sharing
of Payments, Etc.
(a) Each
Borrower and Guarantor agrees that, in addition to (and without limitation
of)
any right of setoff, banker's lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option (but subject,
as
among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset
balances held by it for the account of such Borrower or Guarantor at any of
its
offices, in dollars or in any other currency, against any principal of or
interest on the Loan owed to such Lender or any other amount payable to such
Lender hereunder, that is not paid when due (regardless of whether such balances
are then due to such Borrower or Guarantor), in which case it shall promptly
notify Administrative Borrower and Agent thereof; provided, that, such Lender's
failure to give such notice shall not affect the validity thereof.
(b) If
any
Lender (including Agent) shall obtain from any Borrower or Guarantor payment
of
any principal of or interest on the Loan owing to it or payment of any other
amount under this Agreement or any of the other Financing Agreements through
the
exercise of any right of setoff, banker's lien or counterclaim or similar right
or otherwise (other than from Agent as provided herein), and, as a result of
such payment, such Lender shall have received more than its Pro Rata Share
of
the principal of the Loan or more than its share of such other amounts then
due
hereunder or thereunder by any Borrower or Guarantor to such Lender than the
percentage thereof received by any other Lender, it shall promptly pay to Agent,
for the benefit of Lenders, the amount of such excess and simultaneously
purchase from such other Lenders a participation in the portion of the Loan
or
such other amounts, respectively, owing to such other Lenders (or such interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all Lenders
shall share the benefit of such excess payment (net of any expenses that may
be
incurred by such Lender in obtaining or preserving such excess payment) in
accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments
among themselves (by the resale of participation sold or otherwise) if such
payment is rescinded or must otherwise be restored.
(c) Each
Borrower and Guarantor agrees that any Lender purchasing a participation (or
direct interest) as provided in this Section may exercise, in a manner
consistent with this Section, all rights of setoff, banker's lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of the Loan or other amounts (as the case may be) owing
to
such Lender in the amount of such participation.
43
(d) Nothing
contained herein shall require any Lender to exercise any right of setoff,
banker's lien, counterclaims or similar rights or shall affect the right of
any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other Indebtedness or obligation of any Borrower or
Guarantor. If, under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, assign
such
rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
6.11 Obligations
Several; Independent Nature of Lenders' Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender
hereunder. Nothing contained in this Agreement or any of the other
Financing Agreements and no action taken by the Lenders pursuant hereto or
thereto shall be deemed to constitute the Lenders to be a partnership, an
association, a joint venture or any other kind of entity. The amounts
payable at any time hereunder to each Lender shall be a separate and independent
debt, and subject to Section 12.3 hereof, each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not
be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.
SECTION
7. COLLATERAL
REPORTING AND COVENANTS
7.1 Collateral
Reporting.
(a) Borrowers
shall provide Agent with the following documents in a form satisfactory to
Agent:
(i) when
provided to the Working Capital Agent (but in any event within fifteen (15)
Business Days after the end of each month) or more frequently as Agent may
request, a borrowing base certificate (in the form delivered to the Working
Capital Agent setting forth the calculation of the Borrowing Base as of the
last
Business Day of the immediately preceding month);
(ii) as
soon
as possible after the end of each month (but in any event within fifteen (15)
Business Days after the end thereof), on a monthly basis or more frequently
as
Agent may request, (A) rollforward inventory reports supported by
monthly updates of adjusted cost factors and intercompany eliminations (and
including the amounts of Inventory and the value thereof at any leased locations
and at premises of warehouses, processors or other third parties),
(B) list or agings of outstanding accounts payable (and including information
indicating the amounts owing to owners and lessors of leased premises,
warehouses, fulfillment centers, processors, custom brokers, freight forwarders
and other third parties from time to time in possession of any Collateral),
and
(C) a certificate of an authorized officer of the Administrative Borrower
certifying that sales and use tax collections, deposits and payments are
current;
(iii) as
soon
as possible after the end of each month (but in any event fifteen (15) Business
Days after the end thereof), in each case certified by the chief financial
officer, vice president of finance, treasurer or controller of Administrative
Borrower as true and correct: (A) a statement confirming the delivery of payment
of rent and other amounts due to owners and lessors of real property used by
Borrower in the immediately preceding month, subject to year-end or monthly
percentage rent payment adjustments, (B) the addresses of all new retail store
locations of Borrowers and Guarantors opened and existing retail store locations
closed or sold, in each case since the date of the most recent certificate
delivered to Agent containing the information required under this clause, and
(C) a report of any new deposit account established or used by any Borrower
or
Guarantor with any bank or other financial institution, including the Borrower
or Guarantor in whose name the account is maintained, the account number, the
name and address of the financial institution at which such account is
maintained, the purpose of such account and, if any, the amount held in such
account on or about the date of such report;
44
(iv) as
soon
as possible after the end of each fiscal quarter (but in any event within
forty-five (45) Business Days after the end thereof), on a quarterly basis
or
more frequently as Agent may request, reports by retail store
location of sales and operating profits for each such retail store
location;
(v) upon
Agent's reasonable request, (A) reports of sales for each category of Inventory,
(B) reports of aggregate Inventory purchases and identifying items of
Inventory in transit to any Borrower or Guarantor related to the applicable
documentary letter of credit and/or xxxx of lading number, (C) copies of
remittance advices and reports, and copies of deposit slips and bank statements,
(D) copies of shipping and delivery documents, (E) copies of purchase orders,
invoices and delivery documents for Inventory and Equipment acquired by
Borrowers and Guarantor, (F) reports of inventory subject to a license granted
to a Borrower by a third party, identifying such inventory by item, source,
licensor, royalties paid, royalties payable and applicable license agreement,
and (G) a report of all Inventory purchased or sold by Borrowers on
consignment;
(vi) upon
Agent's reasonable request, (A) copies of customer statements, purchase orders,
sales invoices, credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by any Borrower or Guarantor;
and
(vii) such
other reports as to the Collateral as Agent shall reasonably request from time
to time.
(b) If
any
Borrower's or Guarantor's records or reports of the Collateral are prepared
or
maintained by an accounting service, contractor, shipper or other agent, such
Borrower and Guarantor hereby irrevocably authorizes such service, contractor,
shipper or agent to deliver such records, reports, and related documents to
Agent and to follow Agent's instructions with respect to further
services.
(c) (1)
by no later than 5:00 p.m. (Eastern Time) on the Friday of each week commencing
on June 8, 2007, Borrowers shall furnish to Agent and Lenders, in form
satisfactory to Agent, a report that sets forth for the immediately preceding
week a comparison of the actual cash receipts, cash disbursements, loan balance
and loan availability to the Projected Information for such weekly periods
set
forth in the Budget on a cumulative, weekly roll-forward basis, (2) no later
than 5:00 p.m. on June 8, 2007 and on the Friday of each week thereafter, a
thirteen (13) week statement of cash flow, on a cumulative, weekly roll-forward
basis, and (3) no later than 5:00 p.m. on August 17, 2007 and on the last Friday
of each quarter thereafter, Borrowers shall prepare and present to Agent and
Lenders, in form and substance satisfactory to Agent (which approval shall
not
be unreasonably withheld), a subsequent thirteen (13) week Budget, which
Borrowers acknowledge will be used, after the initial Budget, to establish
the
Material Adverse Deviation for purposes of Section 9.19.
45
7.2 Accounts
Covenants.
(a) Borrowers
shall notify Agent promptly of the assertion of (i) any claims, offsets,
defenses or counterclaims by any account debtor, Credit Card Issuer or Credit
Card Processor or any disputes with any of such persons or any settlement,
adjustment or compromise thereof, to the extent any of the foregoing exceeds
$250,000 in any one case or $500,000 in the aggregate, and (ii) all material
adverse information relating to the financial condition of any account debtor,
Credit Card Issuer or Credit Card Processor. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted
to
any account debtor, Credit Card Issuer or Credit Card Processor except in the
ordinary course of a Borrower's business in accordance with the current
practices of such Borrower as in effect on the date hereof. So long
as no Event of Default exists or has occurred and is continuing, no Borrower
shall settle, adjust or compromise any claim, offset, counterclaim or dispute
with any account debtor, Credit Card Issuer, Credit Card
Processor. Subject to the terms of the Interceditor Agreement, at any
time that an Event of Default exists or has occurred and is continuing, Agent
shall, at its option, have the exclusive right to settle, adjust or compromise
any claim, offset, counterclaim or dispute with account debtors, Credit Card
Issuers or Credit Card Processors or grant any credits, discounts or
allowances.
(b) Borrowers
shall notify Agent promptly of: (i) any notice of a material default
by such Borrower under any of the Credit Card Agreements or of any default
which
has a reasonable likelihood of resulting in the Credit Card Issuer or Credit
Card Processor ceasing to make payments or suspending payments to such Borrower,
(ii) any notice from any Credit Card Issuer or Credit Card Processor that such
person is ceasing or suspending, or will cease or suspend, any present or future
payments due or to become due to any Borrower from such person, or that such
person is terminating or will terminate any of the Credit Card Agreements,
and
(iii) the failure of such Borrower to comply with any material terms of the
Credit Card Agreements or any terms thereof which has a reasonable likelihood
of
resulting in the Credit Card Issuer or Credit Card Processor ceasing or
suspending payments to such Borrower.
(c) Subject
to the terms of the Intercreditor Agreement, Agent shall have the right at
any
time or times, in Agent's name or in the name of a nominee of Agent, to verify
the validity, amount or any other matter relating to any Receivables or other
Collateral, by mail, telephone, facsimile transmission or
otherwise.
7.3 Inventory
Covenants. With
respect to the Inventory: (a) each Borrower and Guarantor shall at all times
maintain inventory records reasonably satisfactory to Agent, keeping correct
and
accurate records reasonably describing the kind, type, quality and quantity
of
Inventory, such Borrower's or Guarantor's cost therefor and daily withdrawals
therefrom and additions thereto; (b) Borrowers and Guarantors shall conduct
a
physical count of the Inventory either through periodic cycle counts or wall
to
wall counts, so that all Inventory is subject to such counts at least once
each
year, but at any time or times as Agent may request at any time an Event of
Default exists or has occurred and is continuing, and
46
promptly
following such physical inventory (whether through periodic cycle counts or
wall
to wall counts) shall supply Agent with a report in the form and with such
specificity as may be reasonably satisfactory to Agent concerning such physical
count; (c) Borrowers and Guarantors shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent
of
Agent except as permitted in Section 9.7(e) hereof, except for sales of
Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to
such
Borrower or Guarantor which is in transit to the locations set forth or
permitted herein and except to return defective or non-conforming Inventory
to
the manufacturers or vendors thereof; (d) upon Agent's request, Borrowers
shall, at their expense, no less than two (2) times in any twelve (12) month
period, but at any time or times as Agent may request on or after an Event
of
Default, deliver or cause to be delivered to Agent written appraisals as to
the
Inventory in form, scope and methodology acceptable to Agent and by an appraiser
acceptable to Agent, addressed to Agent and Lenders and upon which Agent and
Lenders are expressly permitted to rely; provided, that, for the purposes
of this Section 7.3, the form, scope and methodology of the most recent
appraisal conducted and the most recent appraiser used by Borrowers, in each
case, prior to the date hereof shall be deemed acceptable to Agent; (e)
Borrowers and Guarantors shall produce, use, store and maintain the Inventory
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with applicable laws (including the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all
rules, regulations and orders related thereto); (f) none of the Inventory or
other Collateral constitutes farm products or the proceeds thereof; (g) each
Borrower and Guarantor assumes all responsibility and liability arising from
or
relating to the production, use, sale or other disposition of the Inventory;
(h)
Borrowers and Guarantors shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate any
Borrower or Guarantor to repurchase such Inventory except for the right of
return given to retail customers of such Borrower or Guarantor in the ordinary
course of the business of such Borrower or Guarantor in accordance with the
then
current return policy of such Borrower or Guarantor; (i) Borrowers and
Guarantors shall keep the Inventory in good and marketable condition; and (j)
Borrowers and Guarantors shall not, without prior written notice to Agent or
the
specific identification of such Inventory in a report with respect thereto
provided by Administrative Borrower to Agent pursuant to Section 7.1(a) hereof,
acquire or accept any Inventory on consignment or approval.
7.4 Equipment
and Real Property Covenants. Upon
Agent's request, Borrowers and Guarantors shall, at their expense, no more
than
one (1) time in any twelve (12) month period, but at any time or times as Agent
may request on or after an Event of Default, deliver or cause to be delivered
to
Agent written appraisals as to the Baldwyn Real Property in form, scope and
methodology acceptable to Agent and by an appraiser acceptable to Agent,
addressed to Agent and upon which Agent is expressly permitted to rely;
provided, that, for the purposes of this Section 7.4, the form, scope and
methodology of the most recent appraisal conducted and the most recent appraiser
used by Borrowers, in each case, prior to the date hereof shall be deemed
acceptable to Agent; (b) Borrowers and Guarantors shall keep the Equipment
in
good order, repair, and operating condition (ordinary wear and tear excepted);
(c) Borrowers and Guarantors shall use the Equipment and Real Property with
all
reasonable care and caution and in accordance with applicable standards of
any
insurance and in material conformity with all applicable laws; (d) the Equipment
is and shall be used in the business of Borrowers and Guarantors and not for
personal, family, household or farming use; (e) other than in connection with
Permitted Dispositions, Borrowers and Guarantors shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of its
business (or to return defective or non-conforming Equipment to the
manufacturers or vendors thereof) or to move Equipment directly from one
location set forth or permitted herein to another such location and except
for
the movement of motor vehicles used by or for the benefit of such Borrower
or
Guarantor in the ordinary course of business; (f) the Equipment is now and
shall
remain personal property and Borrowers and Guarantors shall not permit any
of
the Equipment to be or become a part of or affixed to real property; and (g)
each Borrower and Guarantor assumes all responsibility and liability arising
from the use of the Equipment and Real Property.
47
7.5 Power
of Attorney. Each
Borrower and Guarantor hereby irrevocably designates and appoints Agent (and
all
persons designated by Agent) as such Borrower's and Guarantor's true and lawful
attorney-in-fact, and authorizes Agent, in such Borrower's, Guarantor's or
Agent's name, subject to the terms of the Intercreditor Agreement, to: (a)
at
any time an Event of Default exists or has occurred and is continuing (i) demand
payment on any Collateral, (ii) enforce payment of any of the Collateral by
legal proceedings or otherwise, (iii) exercise all of such Borrower's or
Guarantor's rights and remedies to collect any Collateral, (iv) sell or assign
any Collateral upon such terms, for such amount and at such time or times as
the
Agent deems advisable, (v) settle, adjust, compromise, extend or renew any
of
the Collateral, (vi) discharge and release any Collateral, (vii) prepare, file
and sign such Borrower's or Guarantor's name on any proof of claim in bankruptcy
or other similar document against an account debtor or other obligor in respect
of any Collateral, (viii) notify the post office authorities to change the
address for delivery of remittances from account debtors or other obligors
in
respect of Collateral to an address designated by Agent, and open and dispose
of
all mail addressed to such Borrower or Guarantor and handle and store all mail
relating to the Collateral; and (ix) do all acts and things which are necessary,
in Agent's determination, to fulfill such Borrower's or Guarantor's obligations
under this Agreement and the other Financing Agreements and (b) at any time
to
(i) take control in any manner of any item of payment constituting Collateral
or
otherwise received in or for deposit in the Blocked Accounts or any item of
payment constituting Collateral is otherwise received by Agent or any Lender,
(ii) have access to any lockbox or postal box into which remittances from
account debtors or other obligors in respect of Collateral are sent or received,
(iii) endorse such Borrower's or Guarantor's name upon any items of payment
in
respect of Collateral received by Agent and any Lender and deposit the same
in
Agent's account for application to the Obligations, (iv) endorse such Borrower's
or Guarantor's name upon any chattel paper, document, instrument, invoice,
or
similar document or agreement relating to any Receivable or any goods pertaining
thereto or any other Collateral, including any warehouse or other receipts,
or
bills of lading and other negotiable or non-negotiable documents, (v) clear
Inventory the purchase of which was financed with a letter of credit through
U.S. Customs or foreign export control authorities in such Borrower's or
Guarantor's name, Agent's name or the name of Agent's designee, and to sign
and
deliver to customs officials powers of attorney in such Borrower's or
Guarantor's name for such purpose, and to complete in such Borrower's or
Guarantor's or Agent's name, any order, sale or transaction, obtain the
necessary documents in connection therewith and collect the proceeds thereof,
and (vi) sign such Borrower's or Guarantor's name on any verification of amounts
owing constituting Collateral and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof. Each
Borrower and Guarantor hereby releases Agent and Lenders and their respective
officers, employees and designees from any liabilities arising from any act
or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Agent's or any Lender's own gross
negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
48
7.6 Right
to Cure. Agent
may, at its option, upon notice to Administrative Borrower, (a) cure any default
by any Borrower or Guarantor under any material agreement with a third party
that affects the Collateral, its value or the ability of Agent to collect,
sell
or otherwise dispose of the Collateral or the rights and remedies of Agent
or
any Lender therein or the ability of any Borrower or Guarantor to perform its
obligations hereunder or under any of the other Financing Agreements, (b) pay
or
bond on appeal any judgment entered against any Borrower or Guarantor, (c)
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (d) pay any amount,
incur any expense or perform any act which, in Agent's judgment, is necessary
or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto. Agent may add any
amounts so expended to the Obligations and charge any Borrower's account
therefor, such amounts to be repayable by Borrowers on demand. Agent
and Lenders shall be under no obligation to effect such cure, payment or bonding
and shall not, by doing so, be deemed to have assumed any obligation or
liability of any Borrower or Guarantor. Any payment made or other
action taken by Agent or any Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder and to proceed
accordingly.
7.7 Access
to Premises. From
time
to time as requested by Agent, at the cost and expense of Borrowers, (a) Agent
or its designee shall have complete access to all of each Borrower's and
Guarantor's premises during normal business hours and after notice to Parent,
or
at any time and without notice to Administrative Borrower if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of each Borrower's and Guarantor's
books and records, including the Records, and (b) each Borrower and Guarantor
shall promptly furnish to Agent such copies of such books and records or
extracts therefrom as Agent may request, and Agent or any Lender or Agent's
designee may use during normal business hours such of any Borrower's and
Guarantor's personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing (subject to the terms of the Intercreditor Agreement) for
the
collection of Receivables and realization of other Collateral.
SECTION
8. REPRESENTATIONS
AND WARRANTIES
Each
Borrower and Guarantor hereby
represents and warrants to Agent and Lenders the following (which shall survive
the execution and delivery of this Agreement); provided, that no
representation and warranty made by a Borrower or Guarantor in this Section
8
shall be incorrect solely by reason of the fact that (i) any Borrower or
Guarantor is prevented by the Bankruptcy Code from making any payment or taking
any action covered by such representation or warranty or (ii) any action
required to be taken by any Borrower or Guarantor or any payments required
to be
made by any Borrower or Guarantor cannot be taken or made without the
authorization of the Bankruptcy Court until such time as the authorization
of
the Bankruptcy Court has been obtained:
49
8.1 Existence,
Power and Authority. Except as set forth in the Information
Certificate, each
Borrower and Guarantor is a corporation or limited liability company duly
organized and in good standing under the laws of its jurisdiction of
organization or formation and is duly qualified as a foreign corporation or
limited liability company and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it
or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on such Borrower's or Guarantor's financial condition, results
of
operation or business or the rights of Agent in or to any of the
Collateral. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions contemplated
hereunder and thereunder (a) are all within each Borrower's and Guarantor's
powers, (b) have been duly authorized, (c) are not in contravention of law
or
the terms of any Borrower's or Guarantor's certificate of incorporation or
formation, by laws, operating agreements or other organizational documentation,
or any indenture, agreement or undertaking to which any Borrower or Guarantor
is
a party or by which any Borrower or Guarantor or its property are bound and
(d)
will not result in the creation or imposition of, or require or give rise to
any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of any Borrower or Guarantor. This Agreement and
the other Financing Agreements to which any Borrower or Guarantor is a party
constitute legal, valid and binding obligations of such Borrower and Guarantor
enforceable in accordance with their respective terms.
8.2 Name;
State of Organization; Chief Executive Office; Collateral
Locations. .
(a) The
exact
legal name of each Borrower and Guarantor is as set forth on the signature
page
of this Agreement and in the Information Certificate. No Borrower or
Guarantor has, during the five years prior to the date of this Agreement, been
known by or used any other corporate or fictitious name or been a party to
any
merger or consolidation, or acquired all or substantially all of the assets
of
any Person, or acquired any of its property or assets out of the ordinary course
of business, except as set forth in the Information Certificate.
(b) Each
Borrower and Guarantor is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower
or
Guarantor has none and accurately sets forth the federal employer identification
number of each Borrower and Guarantor.
(c) The
chief
executive office and mailing address of each Borrower and Guarantor and each
Borrower's and Guarantor's Records concerning Accounts are located only at
the
address identified as such in Schedule 8.2 to the Information Certificate and
its only other places of business and the only other locations of Collateral,
if
any, are the addresses set forth in Schedule 8.2 to the Information Certificate,
subject to the rights of any Borrower or Guarantor to establish new locations
in
accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by a Borrower
or
Guarantor and sets forth the owners and/or operators thereof.
50
8.3 Financial
Statements; No Material Adverse Change. All
financial statements relating to any Borrower or Guarantor which have been
or
may hereafter be delivered by any Borrower or Guarantor to Agent and Lenders
have been prepared in accordance with GAAP (except as to any interim financial
statements, to the extent such statements are subject to normal year-end
adjustments and do not include any notes) and fairly present in all material
respects the financial condition and the results of operation of such Borrower
and Guarantor as at the dates and for the periods set forth
therein. Except as disclosed in any interim financial statements
furnished by Borrowers and Guarantors to Agent prior to the date of this
Agreement, there has been no act, condition or event which has had or is
reasonably likely to have a Material Adverse Effect since the date of the most
recent audited financial statements of any Borrower or Guarantor furnished
by
any Borrower or Guarantor to Agent prior to the date of this
Agreement.
8.4 Priority
of Liens; Title to Properties. The
security interests and liens granted to Agent under this Agreement and the
other
Financing Agreements constitute valid and perfected liens and security interests
in and upon the Collateral subject only to the liens indicated on Schedule
8.4
to the Information Certificate and the other liens permitted under Section
9.8
hereof. Each Borrower and Guarantor has good and marketable fee
simple title to or valid leasehold interests in all of its Real Property and
good, valid and merchantable title to all of its other properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Agent and such others as are
specifically listed on Schedule 8.4 to the Information Certificate or permitted
under Section 9.8 hereof.
8.5 Tax
Returns. Each Borrower
and Guarantor has filed, or caused to be filed, in a timely manner all tax
returns, reports and declarations for the fiscal year ending January 30, 2005
and all prior fiscal years which are required to be filed by it. All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Except as set forth on Schedule
8.5 to the Information Certificate, each Borrower and Guarantor has paid or
caused to be paid all taxes due and payable or claimed due and payable in any
assessment received by it for the fiscal year ending January 30, 2005 and all
prior fiscal years, except taxes the validity of which are being contested
in
good faith by appropriate proceedings diligently pursued and available to such
Borrower or Guarantor and with respect to which adequate reserves have been
set
aside on its books. Adequate provision has been made for the payment
of all accrued and unpaid Federal, State, county, local, foreign and other
taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation.
Except
as
set forth on Schedule 8.6 to the Information Certificate, (a) there is no
investigation by any Governmental Authority pending, or to the best of any
Borrower's or Guarantor's knowledge threatened, against or affecting any
Borrower or Guarantor, its or their assets or business and (b) there is no
action, suit, proceeding or claim by any Person pending, or to the best of
any
Borrower's or Guarantor's knowledge threatened, against any Borrower or
Guarantor or its or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, in each case, which if adversely
determined against such Borrower or Guarantor has or could reasonably be
expected to have a Material Adverse Effect.
51
8.7 Compliance
with Other Agreements and Applicable Laws.
(a) Borrowers
and Guarantors are not in default in any respect under, or in violation in
any
respect of the terms of, any material agreement, contract, instrument, lease
or
other commitment to which it is a party or by which it or any of its assets
are
bound. Borrowers and Guarantors are in compliance with the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority relating to their respective businesses, including,
without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all Environmental Laws, all Federal, State and local
statutes, regulations, rules and orders relating to consumer credit (including,
without limitation, as each has been amended, the Truth-in-Lending Act, the
Fair
Credit Billing Act, the Equal Credit Opportunity Act and the Fair Credit
Reporting Act, and regulations, rules and orders promulgated thereunder), and
all Federal, State and local states, regulations, rules and orders pertaining
to
sales of consumer goods (including, without limitation, the Consumer Products
Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914,
as
amended, and all regulations, rules and orders promulgated thereunder), in
each
case, other than any failure to comply with this Section 8.7(a) that is directly
the result of (i) the commencement of the Chapter 11 Cases, (ii) the financial
condition of the Borrowers and the Guarantors immediately prior to the Petition
Date as disclosed to the Agent and the Lenders in writing, (iii) the delisting
of the stock of Parent or any of its Subsidiaries from the New York Stock
Exchange, or (iv) Borrowers closing certain of their store locations either
(A)
with the prior written consent of Agent with respect to such store closures
or
(B) to the extent permitted by Section 9.7(e) hereof.
(b) Borrowers
and Guarantors have obtained all material permits, licenses, approvals,
consents, certificates, orders or authorizations of any Governmental Authority
required for the lawful conduct of its business (the "Permits"). All
of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or to the
best of any Borrower's or Guarantor's knowledge, threatened that seek the
revocation, cancellation, suspension or modification of any of the
Permits.
8.8 Environmental
Compliance.
(a) Except
as
set forth on Schedule 8.8 to the Information Certificate, Borrowers, Guarantors
and any Subsidiary of any Borrower or Guarantor have not generated, used,
stored, treated, transported, manufactured, handled, produced or disposed of
any
Hazardous Materials, on or off its premises (whether or not owned by it) in
any
manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the operations of Borrowers, Guarantors and
any
Subsidiary of any Borrower or Guarantor complies in all material respects with
all Environmental Laws and all Permits.
(b) Except
as
set forth on Schedule 8.8 to the Information Certificate, there has been no
investigation by any Governmental Authority or any proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of any Borrower's or Guarantor's
knowledge threatened, with respect to any non compliance with or violation
of
the requirements of any Environmental Law by any Borrower or Guarantor or the
release, spill or discharge, threatened or actual, of any Hazardous Material
or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which adversely affects or could reasonably be expected
to adversely affect in any material respect any Borrower or Guarantor or its
or
their business, operations or assets or any properties at which such Borrower
or
Guarantor has transported, stored or disposed of any Hazardous
Materials.
52
(c) Except
as
set forth on Schedule 8.8 to the Information Certificate, Borrowers and
Guarantors have no material liability (contingent or otherwise) in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Borrowers
and Guarantors have all Permits required to be obtained or filed in connection
with the operations of Borrowers and Guarantors under any Environmental Law
and
all of such licenses, certificates, approvals or similar authorizations and
other Permits are valid and in full force and effect.
8.9 Employee
Benefits. Other than any failure to comply with this Section that
is directly the result of (i) the commencement of the Chapter 11 Cases, (ii)
the
financial condition of the Borrowers and the Guarantors immediately prior to
the
Petition Date as disclosed to the Agent and the Lenders in writing, (iii) the
delisting of the stock of Parent or any of its Subsidiaries from the New York
Stock Exchange, or (iv) Borrowers closing certain of their store locations
either (A) with the prior written consent of Agent with respect to such store
closures or (B) to the extent permitted by Section 9.7(e) hereof:
(a) Each
Plan
is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or State law. Each Plan which is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service and to the best of any
Borrower's or Guarantor's knowledge, nothing has occurred which would cause
the
loss of such qualification. Each Borrower and its ERISA Affiliates
have made all required contributions to any Plan subject to Section 412 of
the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There
are
no pending, or to the best of any Borrower's or Guarantor's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any
Plan.
(c) No
ERISA
Event has occurred or is reasonably expected to occur; (ii) based on the latest
valuation of each Pension Plan and on the actuarial methods and assumptions
employed for such valuation (determined in accordance with the assumptions
used
for funding such Pension Plan pursuant to Section 412 of the Code), the
aggregate current value of accumulated benefit liabilities of such Pension
Plan
under Section 4001(a)(16) of ERISA does not exceed the aggregate current value
of the assets of such Pension Plan; (iii) each Borrower and Guarantor, and
their
ERISA Affiliates, have not incurred and do not reasonably expect to incur,
any
liability under Title IV of ERISA with respect to any Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) each Borrower and
Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably
expect to incur, any liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)
each
Borrower and Guarantor, and their ERISA Affiliates, have not engaged in a
transaction that would be subject to Section 4069 or 4212(c) of
ERISA.
53
(d) There
are
no liens, security interests or encumbrances upon, in or against any assets
of
properties of any Borrower or Guarantor arising under ERISA, whether held by
the
Pension Benefit Guaranty Corporation (the "PBGC") or the contributing sponsor
of, or a member of the controlled group thereof, any pension benefit plan of
any
Borrower or Guarantor. No notice or lien has been filed by the PGBC
(or any other Person) pursuant to ERISA against any assets or properties of
any
Borrower or Guarantor.
8.10 Bank
Accounts. All
of
the deposit accounts, investment accounts or other accounts in the name of
or
used by any Borrower or Guarantor maintained at any bank or other financial
institution are set forth on Schedule 8.10 to the Information Certificate,
subject to the right of each Borrower and Guarantor to establish new accounts
in
accordance with Section 5.2 hereof.
8.11 Intellectual
Property. Each
Borrower and Guarantor owns or licenses or otherwise has the right to use all
Intellectual Property necessary for the operation of its business as presently
conducted or proposed to be conducted. As of the date hereof,
Borrowers and Guarantors do not have any Intellectual Property registered,
or
subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Schedule 8.11 to the Information Certificate and has not granted
any licenses with respect thereto other than as set forth in Schedule 8.11
to
the Information Certificate. No event has occurred which permits or
would permit after notice or passage of time or both, the revocation, suspension
or termination of such rights. To the best of any Borrower's and
Guarantor's knowledge, no slogan or other advertising device, product, process,
method, substance or other Intellectual Property or goods bearing or using
any
Intellectual Property presently contemplated to be sold by or employed by any
Borrower or Guarantor infringes any patent, trademark, servicemark, tradename,
copyright, license or other Intellectual Property owned by any other Person
presently and no claim or litigation is pending or threatened against or
affecting any Borrower or Guarantor contesting its right to sell or use any
such
Intellectual Property. Schedule 8.11 to the Information Certificate
sets forth all of the agreements or other arrangements of each Borrower and
Guarantor pursuant to which such Borrower or Guarantor has a license or other
right to use any trademarks, logos, designs, representations or other
Intellectual Property owned by another person as in effect on the date hereof
and the dates of the expiration of such agreements or other arrangements of
such
Borrower or Guarantor as in effect on the date hereof (collectively, together
with such agreements or other arrangements as may be entered into by any
Borrower or Guarantor after the date hereof, collectively, the "License
Agreements" and individually, a "License Agreement"). No trademark,
servicemark, copyright or other Intellectual Property at any time used by any
Borrower or Guarantor which is owned by another person, or owned by such
Borrower or Guarantor subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any person other than Agent,
is affixed to any Eligible Inventory, except (a) to the extent permitted under
the term of the license agreements listed on Schedule 8.11 to the Information
Certificate and (b) to the extent the sale of Inventory to which such
Intellectual Property is affixed is permitted to be sold by such Borrower or
Guarantor under applicable law (including the United States Copyright Act of
1976).
54
8.12 Subsidiaries;
Affiliates; Capitalization.
(a) Each
Borrower and Guarantor does not have any direct or indirect Subsidiaries and
is
not engaged in any joint venture or partnership except as set forth in
Schedule 8.12 to the Information Certificate.
(b) Each
Borrower and Guarantor is the record and beneficial owner of all of the issued
and outstanding shares of Capital Stock of each of the Subsidiaries listed
on
Schedule 8.12 to the Information Certificate as being owned by such
Borrower or Guarantor and there are no proxies, irrevocable or otherwise, with
respect to such shares and no equity securities of any of the Subsidiaries
are
or may become required to be issued by reason of any options, warrants, rights
to subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
is or may become bound to issue additional shares of it Capital Stock or
securities convertible into or exchangeable for such shares.
(c) The
issued and outstanding shares of Capital Stock of each Borrower (other than
Parent) and Guarantor are directly and beneficially owned and held by the
persons indicated in the Information Certificate, and in each case all of such
shares have been duly authorized and are fully paid and non-assessable, free
and
clear of all claims, liens, pledges and encumbrances of any kind, except as
disclosed in writing to Agent prior to the date hereof.
8.13 Labor
Disputes.
(a) Set
forth
on Schedule 8.13 to the Information Certificate is a list (including dates
of
termination) of all collective bargaining or similar agreements between or
applicable to each Borrower and Guarantor and any union, labor organization
or
other bargaining agent in respect of the employees of any Borrower or Guarantor
on the date hereof.
(b) There
is
(i) no significant unfair labor practice complaint pending against any Borrower
or Guarantor or, to the best of any Borrower's or Guarantor's knowledge,
threatened against it, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of
or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or Guarantor or, to best of any Borrower's or Guarantor's
knowledge, threatened against it, and (ii) no significant strike, labor dispute,
slowdown or stoppage is pending against any Borrower or Guarantor or, to the
best of any Borrower's or Guarantor's knowledge, threatened against any Borrower
or Guarantor.
55
8.14 Restrictions
on Subsidiaries. Except
for restrictions contained in this Agreement or any other agreement with respect
to Indebtedness of any Borrower or Guarantor permitted hereunder as in effect
on
the date hereof, there are no contractual or consensual restrictions on any
Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise
restrict (a) the transfer of cash or other assets (i) between any Borrower
or
Guarantor and any of its or their Subsidiaries or (ii) between any Subsidiaries
of any Borrower or Guarantor or (b) the ability of any Borrower or Guarantor
or
any of its or their Subsidiaries to incur Indebtedness or grant security
interests to Agent or any Lender in the Collateral.
8.15 Material
Contracts. Other than any failure to comply with this Section
that is directly the result of (i) the commencement of the Chapter 11 Cases,
(ii) the financial condition of the Borrowers and the Guarantors immediately
prior to the Petition Date as disclosed to the Agent and the Lenders in writing,
(iii) the delisting of the stock of Parent or any of its Subsidiaries from
the
New York Stock Exchange, or (iv) Borrowers closing certain of their store
locations either (A) with the prior written consent of Agent with respect to
such store closures or (B) to the extent permitted by Section 9.7(e) hereof,
(A)
Schedule 8.15 to the Information Certificate sets forth all Material Contracts
to which any Borrower or Guarantor is a party or is bound as of the date hereof;
(B) Borrowers and Guarantors have delivered true, correct and complete copies
of
such Material Contracts to Agent on or before the date hereof; and (C) Borrowers
and Guarantors are not in breach or in default in any material respect of or
under any Material Contract and have not received any notice of the intention
of
any other party thereto to terminate any Material Contract.
8.16 Credit
Card Agreements. Other than any failure to comply with this
Section that is directly the result of (i) the commencement of the Chapter
11
Cases, (ii) the financial condition of the Borrowers and the Guarantors
immediately prior to the Petition Date as disclosed to the Agent and the Lenders
in writing, (iii) the delisting of the stock of Parent or any of its
Subsidiaries from the New York Stock Exchange, or (iv) Borrowers closing certain
of their store locations either (A) with the prior written consent of Agent
with
respect to such store closures or (B) to the extent permitted by Section 9.7(e)
hereof, (A) set forth in Schedule 8.16 hereto is a correct and complete list
of
all of the Credit Card Agreements and all other agreements, documents and
instruments existing as of the date hereof between or among any Borrower, any
of
its Subsidiaries, the Credit Card Issuers, the Credit Card Processors and any
of
their Affiliates; (B) the Credit Card Agreements constitute all of such
agreements necessary for each Borrower to operate its business as presently
conducted with respect to credit cards and debit cards and no Receivables of
any
Borrower arise from purchases by customers of Inventory with credit cards or
debit cards, other than those which are issued by Credit Card Issuers with
whom
such Borrower has entered into one of the Credit Card Agreements set forth
on
Schedule 8.16 hereto or with whom Borrower has entered into a Credit Card
Agreement in accordance with Section 9.18 hereof; (C) each of the Credit Card
Agreements constitutes the legal, valid and binding obligation of the Borrower
that is party thereto and to the best of each Borrower's and Guarantor's
knowledge, the other parties thereto, enforceable in accordance with their
respective terms and is in full force and effect; (D) no material default or
material event of default, or act, condition or event which after notice or
passage of time or both, would constitute a material default or a material
event
of default under any of the Credit Card Agreements exists or has occurred that
would entitle the other party thereto to suspend, withhold or reduce amounts
that would otherwise be payable to a Borrower; (E) each Borrower and the other
parties thereto have complied in all material respects with all of the terms
and
conditions of the Credit Card Agreements to the extent necessary for such
Borrower to be entitled to receive all payments thereunder; and (F) Borrowers
have delivered, or caused to be delivered to Agent, true, correct and complete
copies of all of the Credit Card Agreements.
56
8.17 Interrelated
Businesses. Borrowers
and Guarantors make up a related organization of various entities constituting
a
single economic and business enterprise so that Borrowers and Guarantors share
an identity of interests such that any benefit received by any one of them
benefits the others. Borrowers and Guarantors render services to or
for the benefit of the other Borrowers and/or Guarantors, as the case may be,
purchase or sell and supply goods to or from or for the benefit of the others,
make loans, advances and provide other financial accommodations to or for the
benefit of the other Borrowers and Guarantors (including inter alia, the payment
by Borrowers and Guarantors of creditors of the other Borrowers or Guarantors
and guarantees by Borrowers and Guarantors of indebtedness of the other
Borrowers and Guarantors and provide administrative, marketing, payroll and
management services to or for the benefit of the other Borrowers and
Guarantors). Substantially all of the Inventory is paid for pursuant
to letters of credit funded by Merchandising on behalf of the other Borrowers
or
are otherwise paid for by Merchandising, and Borrowers use substantially all
of
the proceeds from the disposition of the Inventory so purchased to repay the
amounts owing to Merchandising as a result of such
arrangements. Borrowers and Guarantors have centralized accounting
and legal services, certain common officers and directors and generally do
not
provide consolidating financial statements to creditors and certain Borrowers
and Guarantors have the same chief executive office.
8.18 Payable
Practices. Each
Borrower and Guarantor have not made any material change in the historical
accounts payable practices from those in effect immediately prior to the date
hereof, other than any failure to comply with this Section that is directly
the
result of (i) the commencement of the Chapter 11 Cases, (ii) the financial
condition of the Borrowers and the Guarantors immediately prior to the Petition
Date as disclosed to the Agent and the Lenders in writing, (iii) the delisting
of the stock of Parent or any of its Subsidiaries from the New York Stock
Exchange, or (iv) Borrowers closing certain of their store locations either
(A)
with the prior written consent of Agent with respect to such store closures
or
(B) to the extent permitted by Section 9.7(e) hereof.
8.19 Accuracy
and Completeness of Information. All
information furnished by or on behalf of any Borrower or Guarantor in writing
to
Agent or any Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby,
including all information on the Information Certificate is true and correct
in
all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a Material Adverse Affect,
which has not been fully and accurately disclosed to Agent in writing prior
to
the date hereof.
8.20 Survival
of Warranties; Cumulative. All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Agent and Lenders on the date
of
each additional borrowing or other credit accommodation hereunder and shall
be
conclusively presumed to have been relied on by Agent and Lenders regardless
of
any investigation made or information possessed by Agent or any
Lender. The representations and warranties set forth herein shall be
cumulative and in addition to any other representations or warranties which
any
Borrower or Guarantor shall now or hereafter give, or cause to be given, to
Agent or any Lender.
57
8.21 Administrative
Priority; Lien Priority.
(i) After
the
Financing Order Entry Date, the Obligations of the Borrowers and the Guarantors
will constitute allowed administrative expenses in the Chapter 11 Cases,
having priority in payment over all other administrative expenses and unsecured
claims against the Borrowers and the Guarantors now existing or hereafter
arising, of any kind or nature whatsoever, including, without limitation, all
administrative expenses of the kind specified in, or arising or ordered under,
Sections 105, 326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c), 726
and 1114 of the Bankruptcy Code, subject only to (x) the prior payment of
Carve-Out Expenses to the extent set forth in the Agreed Administrative Expense
Priorities and (y) subject to the terms of the Intercreditor Agreement, the
Working Capital Debt.
(ii) Upon
entry of the Financing Order, the Lien and security interest of the Agent on
the
Collateral shall be a valid and perfected Lien, subject only to Permitted
Priority Liens.
(iii) After
the
Financing Order Entry Date, the Financing Order is in full force and effect,
and
has not been reversed, modified, amended, stayed, vacated or subject to a
pending appeal absent the written consent of the Agent, the Required Lenders
and
the Borrowers.
8.22 Appointment
of Trustee or Examiner; Liquidation. No order has been entered in
any Chapter 11 Case (i) for the appointment of a Chapter 11 trustee, (ii) for
the appointment of an examiner with enlarged powers (beyond those set forth
in
Sections 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of
the
Bankruptcy Code or (iii) to convert any Chapter 11 Case to a Chapter 7 case
or
to dismiss any Chapter 11 Case.
SECTION
9. AFFIRMATIVE
AND NEGATIVE COVENANTS
Except
as Agent and such Lenders whose
consent is required pursuant to the terms of this Agreement may otherwise agree
in writing (provided, that no covenant made by a Borrower or Guarantor in
this Section 9 shall be violated solely by reason of the fact that (i) any
Borrower or Guarantor is prevented by the Bankruptcy Code from making any
payment or taking any action covered by such covenant or (ii) any action
required to be taken by any Borrower or Guarantor or any payments required
to be
made by any Borrower or Guarantor cannot be taken or made without the
authorization of the Bankruptcy Court until such time as the authorization
of
the Bankruptcy Court has been obtained):
9.1 Maintenance
of Existence.
(a) Each
Borrower and Guarantor shall at all times preserve, renew and keep in full
force
and effect its existence and rights and franchises with respect thereto and
maintain in full force and effect all licenses, trademarks, tradenames,
approvals, authorizations, leases, contracts and Permits necessary to carry
on
the business as presently or proposed to be conducted, other than as permitted
in Section 9.7 hereto and other than the termination or expiration of leases
in
the ordinary course of business.
58
(b) No
Borrower or Guarantor shall change its name unless each of the following
conditions is satisfied: (i) Agent shall have received not less than thirty
(30)
days prior written notice from Administrative Borrower of such proposed change
in its corporate name, which notice shall accurately set forth the new name;
and
(ii) Agent shall have received a copy of the amendment to the certificate of
incorporation or formation of such Borrower or Guarantor providing for the
name
change certified by the Secretary of State of the jurisdiction of incorporation
or organization of such Borrower or Guarantor as soon as it is
available.
(c) No
Borrower or Guarantor shall change its chief executive office or its mailing
address or organizational identification number (or if it does not have one,
shall not acquire one) unless Agent shall have received not less than thirty
(30) days' prior written notice from Administrative Borrower of such proposed
change, which notice shall set forth such information with respect thereto
as
Agent may require and Agent shall have received such agreements as Agent may
reasonably require in connection therewith. No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 New
Collateral Locations. Each
Borrower and Guarantor may only open any new location within the continental
United States provided such Borrower or Guarantor (a) gives Agent twenty (20)
days prior written notice of the intended opening of any such new location
and
(b) executes and delivers, or causes to be executed and delivered, to Agent
such
agreements, documents, and instruments as Agent may deem reasonably necessary
or
desirable to protect its interests in the Collateral at such
location.
9.3 Compliance
with Laws, Regulations, Etc.
(a) Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
approvals, orders and other Permits applicable to it and duly observe all
requirements of any foreign, Federal, State or local Governmental
Authority.
(b) Borrowers
and Guarantors shall give written notice to Agent immediately upon any
Borrower's or Guarantor's receipt of any notice of, or any Borrower's or
Guarantor's otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any Environmental Law by any Borrower or Guarantor or
(B)
the release, spill or discharge, threatened or actual, of any Hazardous Material
other than in the ordinary course of business and other than as permitted under
any applicable Environmental Law. Copies of all environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations shall
be
promptly furnished, or caused to be furnished, by such Borrower or Guarantor
to
Agent. Each Borrower and Guarantor shall take prompt action to
respond to any material non-compliance with any of the Environmental Laws and
shall regularly report to Agent on such response.
59
(c) Without
limiting the generality of the foregoing, whenever Agent reasonably determines
that there is non-compliance, or any condition which requires any action by
or
on behalf of any Borrower or Guarantor in order to avoid any non compliance,
with any Environmental Law, Borrowers shall, at Agent's request and Borrowers'
expense: (i) cause an independent environmental engineer reasonably acceptable
to Agent to conduct such tests of the site where non-compliance or alleged
non
compliance with such Environmental Laws has occurred as to such non-compliance
and prepare and deliver to Agent a report as to such non-compliance setting
forth the results of such tests, a proposed plan for responding to any
environmental problems described therein, and an estimate of the costs thereof
and (ii) provide to Agent a supplemental report of such engineer whenever the
scope of such non-compliance, or such Borrower's or Guarantor's response thereto
or the estimated costs thereof, shall change in any material
respect.
(d) Each
Borrower and Guarantor shall indemnify and hold harmless Agent and Lenders
and
their respective directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower
or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 Payment
of Taxes and Claims. Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, duly pay and
discharge all material taxes, assessments, contributions and governmental
charges upon or against it or its properties or assets, except for taxes the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower, Guarantor or Subsidiary,
as
the case may be, and with respect to which adequate reserves have been set
aside
on its books to the extent required by GAAP.
9.5 Insurance.
Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times,
maintain with financially sound and reputable insurers insurance with respect
to
the Collateral against loss or damage and all other insurance of the kinds
and
in the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be reasonably satisfactory
to Agent as to form, amount and insurer. Borrowers and Guarantors
shall furnish certificates, policies or endorsements to Agent as Agent shall
reasonably require as proof of such insurance, and, if any Borrower or Guarantor
fails to do so, Agent is authorized, but not required, to obtain such insurance
at the expense of Borrowers. All policies shall provide for at least
thirty (30) days prior written notice to Agent of any cancellation or reduction
of coverage and that Agent may act as attorney for each Borrower and Guarantor
in obtaining, and at any time an Event of Default exists or has occurred and
is
continuing, adjusting, settling, amending and canceling such
insurance. Borrowers and Guarantors shall cause Agent to be named as
a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers and Guarantors shall
obtain non-contributory lender's loss payable endorsements to all insurance
policies in form and substance satisfactory to Agent. Such lender's
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Agent as its interests may appear and further specify that
Agent and Lenders shall be paid regardless of any act or omission by any
Borrower, Guarantor or any of its or their Subsidiaries. Without
limiting any other rights of Agent or Lenders and subject to the terms of the
Intercreditor Agreement, any insurance proceeds received by Agent at any time
may be applied to payment of the Obligations, whether or not then due, in any
order and in such manner as Agent may determine.
60
9.6 Financial
Statements and Other Information.
(a) Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business
of
such Borrower, Guarantor and its Subsidiaries in accordance with
GAAP. Borrowers and Guarantors shall promptly furnish to Agent and
Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations
of
Borrowers and Guarantors, and Borrower shall notify the auditors and accountants
of Borrowers and Guarantors that Agent is authorized to obtain such information
directly from them. Without limiting the foregoing, Borrowers shall
furnish or cause to be furnished to Agent, the following:
(i) commencing
with the month ending September 1, 2007, within forty-five (45) days after
the
end of each fiscal month, monthly unaudited consolidated financial statements
and unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), all in reasonable detail, fairly presenting in all
material respects the financial position and the results of the operations
of
Parent and its Subsidiaries as of the end of and through such fiscal month,
certified to be correct by the chief financial officer of Parent, subject to
normal year-end adjustments, and accompanied by a compliance certificate
substantially in the form of Exhibit C hereto, along with a schedule in form
reasonably satisfactory to Agent of the calculations used in determining, as
of
the end of such fiscal month, whether Borrowers and Guarantors were in
compliance with the covenants set forth in Section 9.19 of this Agreement for
such fiscal month,
(ii) within
forty-five (45) days after the end of each fiscal quarter, quarterly unaudited
consolidated financial statements and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders' equity), all
in
reasonable detail, fairly presenting in all material respects the financial
position and the results of the operations of Parent and its Subsidiaries as
of
the end of and through such fiscal quarter, certified to be correct by the
chief
financial officer of Parent, subject to normal year-end adjustments, and
accompanied by a compliance certificate substantially in the form of Exhibit
C
hereto, along with a schedule in form reasonably satisfactory to Agent of the
calculations used in determining, as of the end of such fiscal quarter, (A)
whether Borrowers and Guarantors were in compliance with the covenants set
forth
in Section 9.19 of this Agreement for such fiscal quarter, and (B) the EBITDA
of
the Parent and its Subsidiaries for the four (4) fiscal quarters ended on the
last day of such fiscal quarter,
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(iii) within
ninety (90) days after the end of each fiscal year, unaudited consolidated
financial statements and unaudited consolidating financial statements of Parent
and its Subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting in all material respects the financial position and the results
of
the operations of Parent and its Subsidiaries as of the end of and for such
fiscal year, and
(iv) at
such
time as available, but in no event later than thirty (30) days prior to the
end
of each fiscal year (commencing with the fiscal year of Borrowers ending on
or
about the last Saturday in January of 2008), projected consolidated financial
statements (including in each case, forecasted balance sheets and statements
of
income and loss, statements of cash flow, and statements of shareholders'
equity) of Parent and its Subsidiaries for the next fiscal year, all in
reasonable detail, and in a format consistent with the projections delivered
by
Borrowers to Agent prior to the date hereof, together with such supporting
information as Agent may reasonably request. Such projected financial
statements shall be prepared on a quarterly basis for the next succeeding year.
Such projections shall represent the reasonable best estimate by Borrowers
and
Guarantors of the future financial performance of Parent and its Subsidiaries
for the periods set forth therein and shall have been prepared on the basis
of
the assumptions set forth therein which Borrowers and Guarantors believe are
fair and reasonable as of the date of preparation in light of current and
reasonably foreseeable business conditions (it being understood that actual
results may differ from those set forth in such projected financial
statements). Each year Borrowers shall provide to Agent a semi-annual
update with respect to such projections or at any time a Default or Event of
Default exists or has occurred and is continuing, more frequently as Agent
may
require.
(b) Borrowers
and Guarantors shall promptly notify Agent in writing of the details of (i)
any
loss, damage, investigation, action, suit, proceeding or claim relating to
Collateral having a value of more than $250,000 or which if adversely determined
would result in any material adverse change in any Borrower's or Guarantor's
business, properties, assets, goodwill or condition, financial or otherwise,
(ii) any Material Contract being terminated or amended or any new Material
Contract entered into (in which event Borrowers and Guarantors shall provide
Agent with a copy of such Material Contract), (iii) any order, judgment or
decree in excess of $250,000 shall have been entered against any Borrower or
Guarantor any of its or their properties or assets, (iv) any notification of
a
material violation of laws or regulations received by any Borrower or Guarantor,
(v) any ERISA Event, and (vi) the occurrence of any Default or Event of
Default.
(c) Promptly
after the sending or filing thereof, Borrowers shall send to Agent copies of
(i)
all reports which Parent or any of its Subsidiaries sends to its security
holders generally, (ii) all reports and registration statements which Parent
or
any of its Subsidiaries files with the Securities Exchange Commission, any
national or foreign securities exchange or the National Association of
Securities Dealers, Inc., and such other reports as Agent may hereafter
specifically identify to Administrative Borrower that Agent will require be
provided to Agent, (iii) all press releases and (iv) all other statements
concerning material changes or developments in the business of a Borrower or
Guarantor made available by any Borrower or Guarantor to the
public.
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(d) Borrowers
and Guarantors shall furnish or cause to be furnished to Agent such budgets,
forecasts, projections and other information respecting the Collateral and
the
business of Borrowers and Guarantors, as Agent may, from time to time,
reasonably request. Agent is hereby authorized to deliver a copy of
any financial statement or any other information relating to the business of
Borrowers and Guarantors to any court or other Governmental Authority or to
any
Lender or Participant or prospective Lender or Participant or any Affiliate
of
any Lender or Participant. Each Borrower and Guarantor hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Agent, at
Borrowers' expense, copies of the financial statements of any Borrower and
Guarantor and any reports or management letters prepared by such accountants
or
auditors on behalf of any Borrower or Guarantor and to disclose to Agent and
Lenders such information as they may have regarding the business of any Borrower
and Guarantor. Any documents, schedules, invoices or other papers
delivered to Agent or any Lender may be destroyed or otherwise disposed of
by
Agent or such Lender one (1) year after the same are delivered to Agent or
such
Lender, except as otherwise designated by Administrative Borrower to Agent
or
such Lender in writing.
(e) Each
Borrower and Guarantor shall provide Agent and Lenders with copies of all
financial reports, schedules and other materials and information at any time
furnished by or on behalf of any Borrower or Guarantor to the Bankruptcy Court,
or the U.S. Trustee or to any creditors' committee appointed in the Chapter
11
Cases or to such Borrower's or Guarantor's shareholders, concurrently with
the
delivery thereof to the Bankruptcy Court, U.S. trustee, creditors' committee
or
shareholders, as the case may be.
(f) Borrowers
shall as soon as possible and in any event within five (5) Business Days after
execution, receipt or delivery thereof, furnish or cause to be furnished to
Agent copies of any material notices that Borrower executes or receives in
connection with any Working Capital Lender Agreement.
(g) Promptly
after delivery or receipt thereof, Borrowers shall furnish or cause to be
furnished to Agent copies of all reports (including any financial information)
delivered to or received from Working Capital Agent or Working Capital Lenders
under the Working Capital Lender Agreements.
(h) Promptly
upon request, Borrowers and Guarantors shall deliver to Agent such other
information concerning the condition or operations, financial or otherwise,
of
any Borrower or Guarantor as Agent may from time to time may reasonably
request.
9.7 Sale
of Assets, Consolidation, Merger, Dissolution, Etc. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly,
(a) merge
into or with or consolidate with any other Person or permit any other Person
to
merge into or with or consolidate with it except that any wholly-owned
Subsidiary of Parent (other than any Borrower) may merge with and into or
consolidate with any other wholly-owned Subsidiary of Parent (other than any
Borrower, and including any such Subsidiary that only becomes a Subsidiary
after
giving effect to such merger or consolidation subject to the conditions set
forth herein) and any Borrower may merge with and into or consolidate with
any
other Borrower, provided, that, in each case each of the following conditions
is
satisfied as determined by Agent: (i) Agent shall have received not
less than ten (10) Business Days' prior written notice of the intention of
such
Subsidiaries to so merge or consolidate, which notice shall set forth in
reasonable detail satisfactory to Agent,
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the
persons that are merging or consolidating, which person will be the surviving
entity, the locations of the assets of the persons that are merging or
consolidating, and the material agreements and documents relating to such merger
or consolidation, (ii) Agent shall have received such other information with
respect to such merger or consolidation as Agent may reasonably request, (iii)
as of the effective date of the merger or consolidation and after giving effect
thereto, no Default or Event of Default shall exist or have occurred, (iv)
Agent
shall have received, true, correct and complete copies of all agreements,
documents and instruments relating to such merger or consolidation, including,
but not limited to, the certificate or certificates of merger to be filed with
each appropriate Secretary of State (with a copy as filed promptly after such
filing), and (v) the surviving corporation shall expressly confirm, ratify
and
assume the Obligations and the Financing Agreements to which it is a party
in
writing, in form and substance satisfactory to Agent, and Borrowers and
Guarantors shall execute and deliver such other agreements, documents and
instruments as Agent may request in connection therewith;
(b) sell,
issue, assign, lease, license, transfer, abandon or otherwise dispose of any
Capital Stock or Indebtedness to any other Person or any of its assets to any
other Person, except for:
(i) Permitted
Dispositions; provided, that, (A) such Borrower or Guarantor shall
follow a process in which (x) in the case of Real Property, it consults with
and
employs the services of Keen Realty, LLC as consultant under the agreement
among
Parent. Fabrics MI and Fabrics LLC and Keen Realty, LLC, dated March 20, 2007
and (y) obtains approval of the Bankruptcy Court, (B) the Net Cash Proceeds
of
such dispositions shall be applied in accordance with Section 2.3(a) hereof
and
(C) as of the date of such sale and after giving effect thereto, no Default
or
Event of Default shall exist or have occurred,
(ii) the
issuance and sale by any Borrower or Guarantor of Capital Stock of such Borrower
or Guarantor after the date hereof,
(iii) the
issuance of Capital Stock of any Borrower or Guarantor consisting of common
stock pursuant to a restricted stock award, an employee stock option or grant
or
similar equity plan or 401(k) plans of such Borrower or Guarantor for the
benefit of its employees, directors and consultants, provided, that, in no
event
shall such Borrower or Guarantor be required to issue, or shall such Borrower
or
Guarantor issue, Capital Stock pursuant to such stock plans or 401(k) plans
which would result in a Change of Control or other Event of
Default,
(iv) the
sublease by any Borrower or Guarantor of any Real Property leased by such
Borrower or Guarantor; provided, that, any such sublease shall be
permitted if, (A) after giving effect thereto, no Default or Event of Default
shall exist or have occurred and be continuing, and (B) such sublease shall
be
on commercially reasonable prices and terms in a bona fide arm's length
transaction, and
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(v) Licenses
and sublicenses of Intellectual Property by a Borrower or Guarantor to another
Borrower or Guarantor in the ordinary course of business and consistent with
past practices.
(c) wind
up,
liquidate or dissolve except that any Guarantor or Subsidiary of Parent (other
than a Borrower) may wind up, liquidate and dissolve, provided, that, each
of
the following conditions is satisfied, (i) the winding up, liquidation and
dissolution of such Guarantor or other Subsidiary shall not violate any law
or
any order or decree of any court or other Governmental Authority in any material
respect and shall not conflict with or result in the breach of, or constitute
a
default under, any indenture, mortgage, deed of trust, or any other agreement
or
instrument to which any Borrower or Guarantor is a party or may be bound,
(ii) such winding up, liquidation or dissolution shall be done in
accordance with the requirements of all applicable laws and regulations, (iii)
effective upon such winding up, liquidation or dissolution, all of the assets
and properties of such Guarantor or other Subsidiary shall be duly and validly
transferred and assigned to its shareholders, free and clear of any liens,
restrictions or encumbrances other than the security interest and liens of
Agent
and Working Capital Agent (and Agent shall have received such evidence thereof
as Agent may require) and Agent shall have received such deeds, assignments
or
other agreements as Agent may request to evidence and confirm the transfer
of
such assets of such Guarantor to a Borrower, (iv) Agent shall have received
all
documents and agreements that any Borrower or Guarantor has filed with any
Governmental Authority or as are otherwise required to effectuate such winding
up, liquidation or dissolution, (v) no Borrower or Guarantor shall assume any
Indebtedness, obligations or liabilities as a result of such winding up,
liquidation or dissolution, or otherwise become liable in respect of any
obligations or liabilities of the entity that is winding up, liquidating or
dissolving, unless such Indebtedness is otherwise expressly permitted hereunder,
(vi) Agent shall have received not less than ten (10) Business Days prior
written notice of the intention of such Guarantor or Subsidiary to wind up,
liquidate or dissolve, and (vii) as of the date of such winding up, liquidation
or dissolution and after giving effect thereto, no Default or Event of Default
shall exist or have occurred; or
(d) agree
to
do any of the foregoing.
(e) Notwithstanding
anything to the contary contained in Section 9.7(b) or any other provision
of
this Agreement or any of the other Financing Agreements, Borrowers and
Guarantors shall not, directly or indirectly, close any retail store locations,
without, in each instance, the prior written consent of Agent (and no such
consent shall be implied from any action, inaction or acquisience by Agent
or
any Lender) provided, that:
(i) No
consent of Agent or any Lender shall be required in connection with either
(A)
the closing of a GOB Store or (B) the sale or other disposition of the Real
Property Leasehold Interests associated with a GOB Store;
(ii) No
consent of Agent or any Lender shall be required in connection with the closing
of an additional 13 stores (in addition to the GOB Stores) to be selected by
the
Borrowers and Guarantors; provided, that consent of the Agent shall be
required in connection with the sale of the Real Property Leasehold Interests
associated with the closing of such stores; and
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(iii) No
consent of Agent or any Lender shall be required in connection with the closing
of a store by Borrowers or Guarantors in which all inventory and other assets
of
Borrowers or Guarantors located in such closed store are moved to a new,
operating store location within a three (3) month period; provided, that
consent of the Agent shall be required in connection with the sale of the Real
Property Leasehold Interests associated with the closing of such
store.
9.8 Encumbrances.
Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of
its
assets or properties, including the Collateral, or file or permit the filing
of,
or permit to remain in effect, any financing statement or other similar notice
of any security interest or lien with respect to any such assets or properties,
except:
(a) the
security interests and liens of Agent for itself and the benefit of the Secured
Parties;
(b) liens
securing the payment of taxes, assessments or other governmental charges or
levies either not yet overdue or the validity of which are being contested
in
good faith by appropriate proceedings diligently pursued and available to such
Borrower, or Guarantor or Subsidiary, as the case may be and with respect to
which adequate reserves have been set aside on its books;
(c) non-consensual
statutory liens (other than liens securing the payment of taxes) arising in
the
ordinary course of such Borrower's, Guarantor's or Subsidiary's business to
the
extent: (i) such liens secure Indebtedness which is not overdue or (ii) such
liens secure Indebtedness relating to claims or liabilities which are fully
insured and being defended at the sole cost and expense and at the sole risk
of
the insurer or being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower, Guarantor or such Subsidiary,
in each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside
on
its books;
(d) zoning
restrictions, easements, licenses, covenants and other restrictions affecting
the use of Real Property which do not interfere in any material respect with
the
use of such Real Property or ordinary conduct of the business of such Borrower,
Guarantor or such Subsidiary as presently conducted thereon or materially impair
the value of the Real Property which may be subject thereto;
(e) purchase
money security interests in Equipment (including Capital Leases) and purchase
money mortgages on Real Property to secure Indebtedness permitted under
Section 9.9(b) hereof;
(f) pledges
and deposits of cash by any Borrower or Guarantor after the date hereof in
the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security benefits consistent
with the current practices of such Borrower or Guarantor as of the date
hereof;
66
(g) pledges
and deposits of cash by any Borrower or Guarantor after the date hereof to
secure the performance of tenders, bids, leases, trade contracts (other than
for
the repayment of Indebtedness), statutory obligations and other similar
obligations in each case in the ordinary course of business consistent with
the
current practices of such Borrower or Guarantor as of the date hereof; provided,
that, in connection with any performance bonds issued by a surety or other
person, the issuer of such bond shall have waived in writing any rights in
or
to, or other interest in, any of the Collateral in an agreement, in form and
substance satisfactory to Agent;
(h) liens
arising from (i) operating leases and the precautionary UCC financing statement
filings in respect thereof and (ii) equipment or other materials which are
not
owned by any Borrower or Guarantor located on the premises of such Borrower
or
Guarantor (but not in connection with, or as part of, the financing thereof)
from time to time in the ordinary course of business and consistent with current
practices of such Borrower or Guarantor and the precautionary UCC financing
statement filings in respect thereof;
(i) liens
or
rights of setoff against credit balances of Borrowers with Credit Card Issuers
or Credit Card Processors or amounts owing by such Credit Card Issuers or Credit
Card Processors to Borrower in the ordinary course of business, but not liens
on
or rights of setoff against any other property or assets of Borrowers, pursuant
to the Credit Card Agreements (as in effect on the date hereof) to secure the
obligations of Borrowers to the Credit Card Issuers or Credit Card Processors
as
a result of fees and chargebacks;
(j) statutory
or common law liens or rights of setoff of depository banks with respect to
funds of Borrowers or Guarantors at such banks to secure fees and charges in
connection with returned items or the standard fees and charges of such banks
in
connection with the deposit accounts maintained by Borrowers and Guarantors
at
such banks (but not any other Indebtedness or obligations);
(k) judgments
and other similar liens arising in connection with court proceedings that do
not
constitute an Event of Default, provided, that, (i) such liens are being
contested in good faith and by appropriate proceedings diligently pursued,
(ii)
adequate reserves or other appropriate provision, if any, as are required by
GAAP have been made therefor, (iii) a stay of enforcement of any such liens
is
in effect and (iv) Agent may establish a Reserve with respect
thereto;
(l) the
security interests and liens set forth on Schedule 8.4 to the Information
Certificate which are not permitted by the other provisions of Section 9.8
above;
(m) non-consensual
security interests and liens which are not permitted by the other provisions
of
Section 9.8 above to secure Indebtedness and other liabilities in an amount
not
to exceed $100,000 in the aggregate;
(n) the
security interests in and liens upon the Collateral (other than the Real
Property Leasehold Interests) in favor of the Working Capital Agent to secure
the Working Capital Debt to the extent permitted hereunder, provided,
that such security interests and liens in favor of the Working Capital Agent
are
and shall at all times be subject to the terms of the Intercreditor Agreement;
and
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(o) the
security interests in and liens upon the Collateral (other than the Real
Property Leashold Interests) to secure the Refinancing Indebtedness subject
to
Section 9.9(i) of this Agreement.
9.9 Indebtedness.
Each
Borrower and Guarantor shall not, and shall not permit any Subsidiaries to,
incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise
become responsible for (directly or indirectly), the Indebtedness, performance,
obligations or dividends of any other Person, except:
(a) the
Obligations;
(b) purchase
money Indebtedness (including Capital Leases) arising after the date hereof
to
the extent secured by purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property not to exceed
$500,000 in the aggregate at any time outstanding so long as such security
interests and mortgages do not apply to any property of such Borrower, Guarantor
or Subsidiary other than the Equipment or Real Property so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment or Real
Property so acquired, as the case may be;
(c) guarantees
by any Borrower or Guarantor of the Obligations of the other Borrowers or
Guarantors in favor of Agent for the benefit of Lenders;
(d) the
Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor
or
any other Subsidiary of Parent arising pursuant to loans permitted
under Section 9.10(d) or (e) hereof, provided, that, as to
any such Indebtedness at any time owing by a Borrower to a Guarantor or any
other Subsidiary of Parent (other than a Borrower), (i) the Indebtedness arising
pursuant to such loans shall be subject to, and subordinate in right of payment
to, the right of Agent and Lenders to receive the prior final payment and
satisfaction in full of all of the Obligations on terms and conditions
acceptable to Agent, (ii) promptly upon Agent's request, Agent shall have
received a subordination agreement, in form and substance satisfactory to Agent,
providing for the terms of the subordination in right of payment of such
Indebtedness of such Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by
such
Guarantor and such Borrower, (iii) such Borrower shall not, directly or
indirectly make, or be required to make, any payments in respect of such
Indebtedness prior to the end of the then current term of this Agreement, except
that Parent and Merchandising may make payments of interest to Resources on
a
quarterly basis in respect of intercompany loans by Resources to Parent or
Merchandising, as the case may be, so long as Resources immediately applies
all
of the proceeds of such interest payments to make an intercompany loan in cash
to Parent or Merchandising in accordance with the terms of Section 9.10(d)
hereof; and (iv) in the case of any Indebtedness owing to a Borrower or
Guarantor, the Indebtedness arising pursuant to any such loan shall not be
evidenced by a promissory note or other instrument, unless the single original
of such note or other instrument is promptly delivered to Agent upon its request
to hold as part of the Collateral, with such endorsement and/or assignment
by
the payee of such note or other instrument as Agent may require;
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(e) Indebtedness
of any Borrower or Guarantor entered into in the ordinary course of business
pursuant to a Hedge Agreement; provided, that, (i) such arrangements are not
for
speculative purposes, and (ii) such Indebtedness shall be unsecured, except
to the extent such Indebtedness constitutes part of the Working Capital
Debt;
(f) unsecured
guarantees by Parent or a Borrower of the obligations of a Borrower arising
pursuant to a lease from a third party in a bona fide arm's length transaction
of real property for use as a retail store location in the ordinary course
of
the business of such Borrower; provided, that, (i) the Person
issuing such guarantee is permitted hereunder to incur directly the obligation
that is being guaranteed and (ii) as of the date on which such guarantee is
issued no Event of Default exists or has occurred and is
continuing;
(g) unsecured
Indebtedness of any Borrower or Guarantor arising after the date hereof to
any
third person (but not to any other Borrower or Guarantor), provided,
that, each of the following conditions is satisfied as determined
by
Agent: (i) such Indebtedness shall be on terms and conditions acceptable to
Agent and shall be subject and subordinate in right of payment to the right
of
Agent and Lenders to receive the prior indefeasible payment and satisfaction
in
full payment of all of the Obligations pursuant to the terms of an intercreditor
agreement between Agent and such third party, in form and substance satisfactory
to Agent, (ii) Agent shall have received not less than ten (10) days prior
written notice of the intention of such Borrower or Guarantor to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory
to
Agent the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Agent may
request with respect thereto, (iii) Agent shall have received true, correct
and complete copies of all Subordinated Debt Documents evidencing or otherwise
related to such Indebtedness, (iv) except as Agent may otherwise agree in
writing, all of the proceeds of the loans or other accommodations giving rise
to
such Indebtedness shall be paid to Agent for application to the Obligations
in
accordance with the terms hereof, (v) as of the date of incurring such
Indebtedness and after giving effect thereto, no Default or Event of Default
shall exist or have occurred, (vi) such Borrower and Guarantor shall not,
directly or indirectly, (A) amend, modify, alter or change the terms of such
Indebtedness or any agreement, document or instrument related thereto, except,
that, such Borrower or Guarantor may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith,
or
(B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness (except pursuant to regularly scheduled payments permitted herein),
or set aside or otherwise deposit or invest any sums for such purpose, and
(vii)
Borrowers and Guarantors shall furnish to Agent all notices or demands in
connection with such Indebtedness either received by any Borrower or Guarantor
or on its behalf promptly after the receipt thereof, or sent by any Borrower
or
Guarantor or on its behalf concurrently with the sending thereof, as the case
may be;
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(h) Indebtedness
of Borrowers and Guarantors to the Working Capital Agent and Working Capital
Lenders party to the Working Capital Loan Agreement evidenced by or arising
under the Working Capital Lender Agreements (as in effect on the date hereof
and
as amended in accordance with the provisions of this Agreement);
provided, that:
(i) the
principal amount of such Indebtedness shall not exceed the lesser of (i)
$105,000,000 and (ii) 105% of the Borrowing Base after giving effect to Reserves
in an amount equal to $17,500,000 plus the amount of the Professional Expense
Cap,
(ii) Borrowers
and
Guarantors shall not, directly or indirectly, amend, modify, alter or change
any
of the terms of such Indebtedness or any of the Working Capital Lender
Agreements as in effect on the date hereof, except, that,
Borrowers and Guarantors may, after prior written notice to Agent, amend,
modify, alter or change the terms thereof so long as any such amendment,
modification, alteration or change taken as a whole does not adversely affect
the Borrowers, Guarantors, Agent and Lenders in any material respect,
and
(iii) Borrowers
and
Guarantors shall furnish to Agent all notices of default or demands for payment
in connection with such Indebtednes either recovered by such Borrower or
Guarantor or on its behalf promptly after the receipt thereof, and all such
notices or demands sent by any Borrower or Guarantor or on its behalf
concurrently with the sending thereof, as the case may be;
(i) Indebtedness
of Borrowers and Guarantors arising after the date hereof issued in exchange
for, or the proceeds of which are used to refinance, replace or substitute
for,
Indebtedness permitted under Section 9.9(h) hereof (the "Refinancing
Indebtedness"); provided, that, as to any such Refinancing
Indebtedness, each of the following conditions is satsified; (i) Agent shall
have received not less than ten (10) Business Days' prior written notice of
the
intention to incur such Indebtedness, which notice shall set forth in detail
reasonably satisfactory to Agent, the amount of such Indebtedness, the schedule
of repayments and maturity date with respect thereto and such other information
with respect thereto as Agent may request, (ii) the terms of such Refinancing
Indebtedness are the same as the Working Capital Lender Agreements as in effect
on the date hereof (other than to reflect current market rates of interest
for
similiar transactions), except, that, Borrowers and Guarantors may
amend, modify, alter or change the terms thereof so long as any such amendment,
modification, alteration or change taken as a whole does not adversely affect
the Borrowers, Guarantors, Agent and Lenders in any material respect, (iii)
promptly upon Agent's request, Agent shall have received true and correct and
complete copies of all agreements, documents and instruments evidencing or
otherwise related to such Indebtedness, as duly executed and delivered by the
parties thereto, (iv) the holder or holders of the Refinancing Indebtedness
(or
the agent on behalf of such holder or holders) shall execute and deliver an
agreement identical to the Intercreditor Agreement (subject to changing names
of
parties, documents and addresses, as appropriate), and (v) Borrowers and
Guarantors shall furnish to Agent all notices of default or demands for payment
in connection with such Indebtedness either by such Borrower or Guarantor or
on
its behalf promptly after the receipt thereof, and all such notices or demands
sent by any Borrower or Guarantor or on its behalf concurrently with the sending
thereof, as the case may be;
(j) any
Indebtedness existing on the Petition Date; and
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(k) unsecured
Indebtedness of any Borrower or Guarantor arising after the date hereof to
any
third person which is not permitted by the other provisions of Section 9.9
above
in an aggregate oustanding amount not to exceed $100,000 at any
time.
9.10 Loans,
Investments, Etc. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary immediately prior
to such merger) any Capital Stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, or make or permit to
exist
any investment or any other interest in, any other Person, or purchase or
otherwise acquire (in one transaction or a series of transactions) any assets
of
any other Person constituting a business unit or all or a substantial part
of
the assets or property of any other Person (whether through purchase of assets,
merger or otherwise), or form or acquire any Subsidiaries, or agree to do any
of
the foregoing (each of the foregoing an "Investment"), except:
(a) Permitted
Investments;
(b) Intentionally
Omitted;
(c) Investments
by a Borrower, Guarantor or other Subsidiary of Parent in a Borrower or by
a
Guarantor or other Subsidiary of Parent (other than a Borrower) in another
Guarantor, in each case after the date hereof, provided, that, to
the extent that such Investment gives rise to any Indebtedness, such
Indebtedness is permitted hereunder and to the extent that such Investment
gives
rise to the issuance of any shares of Capital Stock, such issuance is permitted
hereunder;
(d) loans
by
a Borrower or Guarantor to another Borrower or Guarantor after the date hereof,
provided, that,
(i) as
to all
of such loans, (A) within thirty (30) days after the end of each fiscal month,
Borrowers shall provide to Agent a report in form and substance satisfactory
to
Agent of the outstanding amount of such loans as of the last day of the
immediately preceding month and indicating any loans made and payments received
during the immediately preceding month, (B) the Indebtedness arising pursuant
to
any such loan shall not be evidenced by a promissory note or other instrument,
unless the single original of such note or other instrument (and any amendment
or modification thereto) is promptly delivered to Agent (or if the Working
Capital Loan Agreement has not been terminated, to Working Capital Agent, with
copies to Agent) to hold as part of the Collateral, with such endorsement and/or
assignment by the payee of such note or other instrument as Agent, or Working
Capital Agent, as applicable, may require,
(ii) as
to
loans by a Borrower to a Guarantor or by a Guarantor to another Guarantor,
as of
the date of any such loan and after giving effect thereto, as of the date of
any
such loan and after giving effect thereto, no Default or Event of Default shall
exist or have occurred and be continuing,
(iii) as
to
loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to
such loan shall be subject to, and subordinate in right of payment to, the
right
of Agent and Lenders to receive the prior final payment and satisfaction in
full
of all of the Obligations on terms and conditions acceptable to Agent, (B)
promptly upon Agent's request, Agent shall have received a subordination
agreement, in form and substance satisfactory to Agent, providing for the terms
of the subordination in right of payment of such Indebtedness of such Borrower
to the prior final payment and satisfaction in full of all of the Obligations,
duly authorized, executed and delivered by such Guarantor and such Borrower,
and
(C) such Borrower shall not, directly or indirectly make, or be required to
make, any payments in respect of such Indebtedness prior to the end of the
then
current term of this Agreement, except that Parent and Merchandising may make
payments of interest to Resources on a quarterly basis in respect of
intercompany loans by Resources to Parent or Merchandising, as the case may
be,
so long as Resources immediately applies all of the proceeds of such interest
payments to make an intercompany loan in cash to Parent or Merchandising in
accordance with the terms of Section 9.10(d) hereof; and
71
(iv) the
aggregate outstanding principal amount of all loans made by Borrowers to
Guarantors shall not exceed $100,000 at any time; and
(e) the
loans
and advances set forth on Schedule 9.10 to the Information Certificate which
are
not permitted by the other provisions of Section 9.10 above; provided,
that:
(i) as
to all
such loans and advances, (A) Borrowers and Guarantors shall not, directly or
indirectly, amend, modify, alter or change the terms of such loans and advances
or any agreement, document or instrument related thereto, except that Borrowers
and Guarantors may amend any such agreement, document or instrument to increase
the principal amount of any loans made by a Guarantor to a Borrower so long
as
the single original of any amendment to any note or other instrument shall
be
promptly delivered to Agent to hold as part of the Collateral with such
endorsement and/or assignment by the payee of such note or other instrument
as
Agent may require, and (B) Borrowers and Guarantors shall furnish to Agent
all
notices or demands in connection with such loans and advances either received
by
any Borrower or Guarantor or on its behalf, promptly after the receipt thereof,
or sent by any Borrower or Guarantor or on its behalf, concurrently with the
sending thereof, as the case may be; and
(ii) as
to
loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to
such loan shall be subject to, and subordinate in right of payment to, the
right
of Agent and Lenders to receive the prior final payment and satisfaction in
full
of all of the Obligations on terms and conditions acceptable to Agent, (B)
Agent
shall have received a subordination agreement, in form and substance
satisfactory to Agent, providing for the terms of the subordination in right
of
payment of such Indebtedness of such Borrower to the prior final payment and
satisfaction in full of all of the Obligations, duly authorized, executed and
delivered by such Guarantor and such Borrower, and (C) such Borrower shall
not,
directly or indirectly make, or be required to make, any payments in respect
of
such Indebtedness prior to the end of the then current term of this Agreement,
except that Parent and Merchandising may make payments of interest to Resources
on a quarterly basis in respect of intercompany loans by Resources to Parent
or
Merchandising, as the case may be, so long as Resources immediately applies
all
of the proceeds of such interest payments to make an intercompany loan in cash
to Parent or Merchandising in accordance with the terms of Section 9.10(d)
hereof.
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9.11 Restricted
Payments. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except:
(a) Parent
may make Restricted Payments with respect to its Capital Stock payable solely
in
additional shares of its Capital Stock that satisfies the requirements for
issuance of Capital Stock by Parent under Section 9.7(b)(ii)
hereof;
(b) Subsidiaries
of any Borrower or Guarantor may make Restricted Payments to a Borrower;
and
(c) Enterprises
may make Restricted Payments to Resources for the purpose of paying dividends
in
respect of the Capital Stock of Enterprises so long as Resources immediately
applies all of the proceeds of such Restricted Payments to make an intercompany
loan in cash to Parent in accordance with the terms of Section 9.10(d)
hereof.
9.12 Transactions
with Affiliates. Each
Borrower and Guarantor shall not, directly or indirectly, purchase, acquire
or
lease any property from, or sell, transfer or lease any property to, any
officer, director or other Affiliate of such Borrower or Guarantor, except
(a)
in the ordinary course of such Borrower's or Guarantor's business and upon
terms
no less favorable to such Borrower or Guarantor than such Borrower or Guarantor
would obtain in a comparable arm's length transaction with an unaffiliated
person, (b) for any purchase or acquisition by any Borrower from another
Borrower, any sale or transfer by any Borrower to another Borrower, or any
lease
of any property by any Borrower from another Borrower or lease of any property
from any Borrower to another Borrower and (c) transactions expressly permitted
by Section 9.7, 9.9, 9.10 or 9.11 hereof.
9.13 Compliance
with ERISA. Each
Borrower and Guarantor shall, and shall cause each of its ERISA Affiliates
to:
(a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal and State law; (b)
cause each Plan which is qualified under Section 401(a) of the Code to maintain
such qualification; (c) not terminate any Pension Plan so as to incur any
material liability to the Pension Benefit Guaranty Corporation; (d) not allow
or
suffer to exist any prohibited transaction involving any Plan or any trust
created thereunder which would subject such Borrower, Guarantor or such ERISA
Affiliate to a material tax or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all required
contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or
suffer to exist any accumulated funding deficiency, whether or not waived,
with
respect to any such Pension Plan; (g) not engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA; or (h) not allow
or
suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any Plan that is a single employer plan, which
termination could result in any material liability to the Pension Benefit
Guaranty Corporation.
9.14 End
of
Fiscal Years; Fiscal Quarters. Each
Borrower and Guarantor shall, for financial reporting purposes, cause its,
and
each of its Subsidiaries' (a) fiscal years to end on the last Saturday closest
to January 31st of each year and (b) fiscal quarters to end on or about each
April 30th, July 31st, October 31st and January 31st of each year.
73
9.15 Change
in Business. Each
Borrower and Guarantor shall not engage in any business other than the business
of such Borrower or Guarantor on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which such Borrower
or
Guarantor is engaged on the date hereof.
9.16 Limitation
of Restrictions Affecting Subsidiaries. Each
Borrower and Guarantor shall not, directly, or indirectly, create or otherwise
cause or suffer to exist any encumbrance or restriction which prohibits or
limits the ability of any Subsidiary of such Borrower or Guarantor to (a) pay
dividends or make other distributions or pay any Indebtedness owed to such
Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; (b)
make
loans or advances to such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (c) transfer any of its properties or assets to such
Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; or (d)
create, incur, assume or suffer to exist any lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, except for
encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement or the Working Capital Loan Agreement, (iii) customary provisions
restricting subletting or assignment of any lease governing a leasehold interest
of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor,
(iv) customary restrictions on dispositions of real property interests found
in
reciprocal easement agreements of such Borrower or Guarantor or any Subsidiary
of such Borrower or Guarantor, (v) any agreement relating to permitted
Indebtedness incurred by a Subsidiary of such Borrower or Guarantor prior to
the
date on which such Subsidiary was acquired by such Borrower or such Guarantor
and outstanding on such acquisition date, and (vi) the extension or continuation
of contractual obligations in existence on the date hereof; provided, that,
any
such encumbrances or restrictions contained in such extension or continuation
are no less favorable to Agent and Lenders than those encumbrances and
restrictions under or pursuant to the contractual obligations so extended or
continued.
9.17 License
Agreements.
(a) With
respect to a License Agreement applicable to Intellectual Property that is
owned
by a third party and licensed to a Borrower or Guarantor and that is affixed
to
or otherwise used in connection with the manufacture, sale or distribution
of
any Inventory, each Borrower and Guarantor shall (i) give Agent not less than
ninety (90) days prior written notice of its intention to not renew or to
terminate, cancel, surrender or release its rights under any such License
Agreement, or to amend any such License Agreement or related arrangements to
limit the scope of the right of such Borrower or Guarantor to use the
Intellectual Property subject to such License Agreement in any material respect,
either with respect to product, territory, term or otherwise, or to increase
in
any material respect the amounts to be paid by such Borrower or Guarantor
thereunder or in connection therewith, (ii) give Agent prompt written notice
of
any such License Agreement entered into by such Borrower or Guarantor after
the
date hereof, or any material amendment to any such License Agreement existing
on
the date hereof, in each case together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may in good
faith request, (iii) give Agent prompt written notice of any material breach
of
any obligation, or any default, by the third party that is the licensor or
by
the Borrower or Guarantor that is the licensee or any other party under any
such
License Agreement, and deliver to Agent (promptly upon the receipt thereof
by
such Borrower or Guarantor in the case of a notice to such Borrower or Guarantor
and concurrently with the sending thereof in the case of a notice from such
Borrower or Guarantor) a copy of each notice of default and any other notice
received or delivered by such Borrower or Guarantor in connection with any
such
a License Agreement that relates to the scope of the right, or the continuation
of the right, of such Borrower or Guarantor to use the Intellectual Property
subject to such License Agreement or the amounts required to be paid
thereunder.
74
(b) With
respect to a License Agreement applicable to Intellectual Property that is
owned
by a third party and licensed to a Borrower or Guarantor and that is affixed
to
or otherwise used in connection with the manufacture, sale or distribution
of
any Inventory, at any time an Event of Default shall exist or have occurred
and
be continuing, Agent shall have, and is hereby granted, the irrevocable right
and authority, at its option, to renew or extend the term of such License
Agreement, whether in its own name and behalf, or in the name and behalf of
a
designee or nominee of Agent or in the name and behalf of such Borrower or
Guarantor, subject to and in accordance with the terms of such License
Agreement. Agent may, but shall not be required to, perform any or
all of such obligations of such Borrower or Guarantor under any of the License
Agreements, including, but not limited to, the payment of any or all sums due
from such Borrower or Guarantor thereunder. Any sums so paid by Agent
shall constitute part of the Obligations.
9.18 Credit
Card Agreements. Each
Borrower shall (a) observe and perform all material terms, covenants, conditions
and provisions of the Credit Card Agreements to be observed and performed by
it
at the times set forth therein; and (b) at all times maintain in full force
and
effect the Credit Card Agreements and not terminate, cancel, surrender, modify,
amend, waive or release any of the Credit Card Agreements, or consent to or
permit to occur any of the foregoing; except, that, (i) any Borrower may
terminate or cancel any of the Credit Card Agreements in the ordinary course
of
the business of such Borrower; provided, that, such Borrower shall
give Agent not less than thirty (30) days prior written notice of its intention
to so terminate or cancel any of the Credit Card Agreements; (d) not enter
into
any new Credit Card Agreements with any new Credit Card Issuer unless (i) Agent
shall have received not less than thirty (30) days prior written notice of
the
intention of such Borrower to enter into such agreement (together with such
other information with respect thereto as Agent may request) and (ii) such
Borrower delivers, or causes to be delivered to Agent, a Credit Card
Acknowledgment in favor of Agent, (e) give Agent immediate written notice of
any
Credit Card Agreement entered into by such Borrower after the date hereof,
together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may request; and (f) furnish to Agent,
promptly upon the request of Agent, such information and evidence as Agent
may
require from time to time concerning the observance, performance and compliance
by such Borrower or the other party or parties thereto with the terms, covenants
or provisions of the Credit Card Agreements.
9.19 Material
Adverse Deviation. At any time after both (a) one or more Loans
in the aggregate principal amount of $17,500,000 have been made to Borrowers
and
(b) Excess Availability is less than $5,000,000, Borrowers and Guarantors shall
not permit a Material Adverse Deviation to occur; provided, that if
Borrowers fail to deliver to the Agent and each Lender an updated Budget at
the
end of each quarter in accordance with Section 7.1(c)(3) which is in form and
substance satisfactory to the Agents (which approval shall not be unreasonably
withheld), a Material Adverse Deviation shall be deemed to have
occured.
75
9.20 After
Acquired Real Property. If
any
Borrower or Guarantor hereafter acquires any Real Property, fixtures or any
other property that is of the kind or nature described in a Mortgage and such
Real Property, fixtures or other property is adjacent to, contiguous with or
necessary or related to or used in connection with any Real Property then
subject to a Mortgage, or if such Real Property is not adjacent to, contiguous
with or related to or used in connection with such Real Property, then if such
Real Property, fixtures or other property at any location (or series of
adjacent, contiguous or related locations, and regardless of the number of
parcels) has a fair market value in an amount equal to or greater than $250,000
(or if an Event of Default exists, then regardless of the fair market value
of
such assets), without limiting any other rights of Agent or any Lender, or
duties or obligations of any Borrower or Guarantor, reasonably promptly upon
Agent's request, such Borrower or Guarantor shall execute and deliver to Agent
a
mortgage, deed of trust or deed to secure debt, as Agent may determine, in
form
and substance substantially similar to a Mortgage and as to any provisions
relating to specific state laws satisfactory to Agent and in form appropriate
for recording in the real estate records of the jurisdiction in which such
Real
Property or other property is located granting to Agent a lien and mortgage
on
and security interest in such Real Property, fixtures or other property (except
as such Borrower or Guarantor would otherwise be permitted to incur hereunder
or
under a Mortgage or as otherwise consented to in writing by Agent) and such
other agreements, documents and instruments as Agent may require in connection
therewith provided, that, as to any such Real Property that is not
adjacent, contiguous or related to Real Property then subject to a Mortgage,
if
the purchase price for such Real Property is paid with the initial proceeds
of a
loan from a financial institution giving rise to Indebtedness permitted under
Section 9.9(b) hereof, then such Borrower or Guarantor shall not be required
to
execute and deliver such mortgage, deed of trust or deed to secure debt in
favor
of Agent with respect to such Real Property.
9.21 Foreign
Assets Control Regulations, Etc.
None
of
the requesting or borrowing of the Loan or the use of the proceeds of any
thereof will violate the Trading With the Enemy Act (50 USC §1 et seq., as
amended) (the "Trading With the Enemy Act") or any of the foreign assets control
regulations of the United States Treasury Department (31 C.F.R., Subtitle B,
Chapter V, as amended) (the "Foreign Assets Control Regulations") or any
enabling legislation or executive order relating thereto (including, but not
limited to (a) Executive order 13224 of September 21, 2001 Blocking Property
and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56). None of Borrowers or any of their Subsidiaries is or will
become a "blocked person" as described in the Executive Order, the Trading
with
the Enemy Act or the Foreign Assets Control Regulations or engages or
will engage in any dealings or transactions, or be otherwise associated, with
any such "blocked person".
9.22 Costs
and Expenses. Borrowers
and Guarantors shall pay to Agent reasonably promptly after demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Agent's
rights in the Collateral, this Agreement, the other Financing Agreements and
all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, without
limitation: (a) all costs and expenses of filing or recording
(including Uniform
76
Commercial
Code financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) costs and
expenses and fees for insurance premiums, environmental audits, title insurance
premiums, surveys, assessments, engineering reports and inspections, appraisal
fees and search fees, background checks, costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Agent's customary charges and
fees with respect thereto; (c) charges, fees or expenses charged by any Lender
in connection with any action required of Borrowers and Guarantors under the
Financing Agreements or the Financing Order that Borrowers and Guarantors fail
to take; (d) costs and expenses of preserving and protecting the Collateral;
(e)
costs and expenses (including attorney's and paralegal fees and disbursements)
paid or incurred in connection with obtaining payment of the Obligations,
enforcing the security interests and liens of Agent, selling or otherwise
realizing upon the Collateral, and otherwise enforcing the provisions of this
Agreement and the other Financing Agreements and the Financing Order or
defending any claims made or threatened against Agent or any Lender arising
out
of the transactions contemplated hereby and thereby (including preparations
for
and consultations concerning any such matters); (f) all out-of-pocket expenses
and costs heretofore and from time to time hereafter incurred by Agent during
the course of periodic field examinations of the Collateral and such Borrower's
or Guarantor's operations, plus a per diem charge at Agent's then standard
rate
for Agent's examiners in the field and office (which rate as of the date hereof
is $1,500 per person per day), (g) costs of appraisals, inspections and
verifications of the Collateral and including travel, lodging, and meals for
inspections of the Collateral and Borrower's and Guarantors' operations by
Agent
or its agent and to attend court hearings or otherwise in connection with the
Chapter 11 Cases; (h) all broker fees that may become due in connection with
the
transactions contemplated by this Agreement and the other Financing Agreements,
and (i) the fees and disbursements of counsel (including legal assistants)
to
Agent in connection with any of the foregoing, including, without limitation,
in
connection with any amendment, supplement, waiver, consent or subsequence
closing in connection with this Agreement, the other Financing Agreements,
the
Financing Order and the transactions contemplated
thereby. Notwithstanding the foregoing, so long as no Default or
Event of Default exists or has occurred and is continuing, (i) the audit fees
and appraisal fees payable by Borrowers under this Section 9.22 shall not exceed
$300,000 in any twelve (12) month period and (ii) the aggregate amount of
consulting fees payable by Borrowers for the consultants (including Huron
Consulting) retained by Borrowers at the request of Agent shall not exceed
$200,000 in any twelve (12) month period.
9.23 Further
Assurances.
(a) In
the
case of the formation or acquisition by a Borrower or Guarantor of any
Subsidiary after the date hereof, as to any such Subsidiary, (i) the Borrower
or
Guarantor forming such Subsidiary shall cause any such Subsidiary to execute
and
deliver to Agent, the following (each in form and substance satisfactory to
Agent), (A) an absolute and unconditional guarantee of payment of the
Obligations, (B) a security agreement granting to Agent a first security
interest and lien (subject to the terms of the Intercreditor Agreement and
except as otherwise consented to in writing by Agent) upon all of the assets
of
any such Subsidiary of the type or category of the assets of Borrowers subject
to the security interests and liens pursuant hereto, and (C) such other
agreements, documents and instruments as Agent may require in connection with
the documents referred to above in order to make such Subsidiary a party to
this
Agreement as a "Borrower" or as a "Guarantor" as Agent may determine, including,
but not limited to, supplements and amendments hereto, authorization to file
UCC
financing statements, collateral access agreements and other consents, waivers,
acknowledgments and other agreements from third persons which
77
Agent
may
deem necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the assets purchased, corporate resolutions and
other organization and authorizing documents of such Person, and favorable
opinions of counsel to such person and (ii) the Borrower or Guarantor forming
such Subsidiary shall (A) execute and deliver to Agent, a pledge and security
agreement, in form and substance satisfactory to Agent, granting to Agent a
pledge of and lien on all of the issued and outstanding shares of Capital Stock
of any such Subsidiary, and (B) deliver the original stock certificates
evidencing such shares of Capital Stock (or such other evidence as may be issued
in the case of a limited liability company), together with stock powers with
respect thereto duly executed in blank (or the equivalent thereof in the case
of
a limited liability company in which such interests are certificated, or
otherwise take such actions as Agent shall require with respect to Agent's
security interests therein). The assurances contemplated by this
Section 9.23 shall be given under applicable non-bankruptcy law (to the extent
not inconsistent with the Bankruptcy Code and the Financing Order) as well
as
the Bankruptcy Code, it being the intention of the parties that the Agent may
request assurances under applicable non-bankruptcy law, and such request shall
be complied with (if otherwise made in good faith by the Agent) whether or
not
the Financing Order is in force and whether or not dismissal of the Chapter
11
Cases or any other action by the Bankruptcy Court is imminent, likely or
threatened.
(b) At
the
request of Agent at any time and from time to time, subject to the Intercreditor
Agreement, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as
may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent may at any time and from time to time request a
certificate from an officer of any Borrower or Guarantor representing that
all
conditions precedent to the making of the Loan contained herein are
satisfied.
9.24 Bankruptcy
Court Orders; Administrative Priority; Lien Priority; Payment of
Claims. Each Borrower and Guarantor shall not:
(i) At
any
time, seek, consent to or suffer to exist any reversal, modification, amendment,
stay or vacation of any of the Financing Orders, except for modifications and
amendments agreed to by the Agent and the Required Lenders;
(ii) at
any
time, suffer to exist a priority for any administrative expense or unsecured
claim against any of the Borrowers (now existing or hereafter arising of any
kind or nature whatsoever), including without limitation any administrative
expenses of the kind specified in, or arising or ordered under, Sections 105,
326, 328, 330, 331, 503(b), 506(c), 507(a), 507(b), 546(c) 726 and 1114 of
the
Bankruptcy Code equal or superior to the priority of the Agent and the Lenders
in respect of the Obligations, except as provided in Section 5.2 hereof and
except for (x) the Carve-Out Expenses having priority of payment over the
Obligations to the extent set forth in clause "first" of the definition of
the
term "Agreed Administrative Expense Priorities" and (y) subject to the terms
of
the Intercreditor Agreement, the Working Capital Debt;
78
(iii) at
any
time, suffer to exist any Lien on the Collateral having a priority equal or
superior to the Lien in favor of the Agent for the benefit of the Agent and
the
Lenders in respect of the Collateral, except for Permitted Priority Liens;
and
(iv) prior
to
the date on which the Obligations have been paid in full in cash, pay any
administrative expense claims except (i) Priority Professional Expenses and
other payments pursuant to sub-clause (i) of clause "first" of the
definition of the term "Agreed Administrative Expense Priorities", (ii)
Obligations due and payable hereunder and, subject to the terms of the
Intercreditor Agreement, the Working Capital Debt, and (iii) other
administrative expense and professional claims incurred in the ordinary course
of the business of the Borrowers and the Guarantors or their respective Chapter
11 Cases, in each case to the extent and having the order of priority set forth
in the definition of the term "Agreed Administrative Expense
Priorities".
9.25 Payments. Make
any payment of principal or interest or otherwise on account of any Indebtedness
or trade payable incurred prior to the Petition Date, provided that such
payments may be made: (i) to the holders of, or in respect of, wage,
salary, commission, employee benefit and other employee compensation obligations
(including expense reimbursements) which arose prior to the Petition Date;
(ii) to landlords in connection with the assumption of unexpired leases
under Section 365 of the Bankruptcy Code in an aggregate amount not to
exceed $4,000,000; (iii) to lessors and non-debtor
parties to executory contracts in connection with the assumption of such leases
and contracts under Section 365 of the Bankruptcy Code in an aggregate
amount not to exceed $1,500,000; (iv) in respect of workers' compensation
benefits and liability and property insurance liabilities of the Loan Parties
not covered by insurance policies in an aggregate amount not to exceed
$5,000,000; (v) in respect of payroll taxes, sales and use taxes,
garnishment payments or other trust fund disbursements in accordance with past
practice of the Borrowers and the Guarantors; and (vi) to the holders of
Permitted Priority Liens, the proceeds of the assets subject to such Permitted
Priority Liens in connection with the sale of such assets (to the extent
permitted by the terms of this Agreement), in each case, after prior written
notice of such payment has been given by the Borrowers or the Guarantors to
the
Agent and subject to approval of the Bankruptcy Court.
SECTION
10. EVENTS
OF DEFAULT AND REMEDIES
10.1 Events
of Default. The
occurrence or existence of any one or more of the following events are referred
to herein individually as an "Event of Default", and collectively as "Events
of
Default":
79
(a) (i)
any
Borrower fails to pay any of the Obligations when due or (ii) any Borrower
or
Guarantor fails to perform any of the covenants contained in Sections 9.3,
9.4,
9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall continue
for
twenty (20) days; provided, that, such twenty (20) day period
shall not apply in the case of: (A) any failure to observe any such covenant
which is not capable of being cured at all or within such twenty (20) day period
or which has been the subject of a prior failure within a six (6) month period
or (B) an intentional breach by any Borrower or Guarantor of any such covenant
or (iii) any Borrower or Guarantor fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement other than those described
in Sections 10.1(a)(i) and 10.1(a)(ii) above; provided, that, in the
event Borrowers fail to comply with the requirements of Sections 7.1(c)(1)
and
(2) herein, Borrowers shall have an additional two (2) Business Days in which
to
comply with the requirements of such sections (the "Reporting Grace Period");
provided, further, that, unless otherwise consented to in
writing by Agent, Borrowers shall not be entitled to more than two (2) Reporting
Grace Periods during any calendar month, or (iv) any Borrower or Guarantor
fails
to perform in any material respect any of the terms, covenants, conditions
or
provisions contained in any of the other Financing Agreements other than those
described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any
representation, warranty or statement of fact made by any Borrower or Guarantor
to Agent in this Agreement, the other Financing Agreements or any other written
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
(c) any
Guarantor revokes or terminates or purports to revoke or terminate or fails
to
perform any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Agent or any
Lender;
(d) one
or
more judgments for the payment of money is or are rendered against any Borrower
or Guarantor in excess of $750,000 in the aggregate (to the extent not covered
by insurance where the insurer has assumed responsibility in writing for such
judgment) and shall remain undischarged or unvacated for a period in excess
of
thirty (30) days or execution shall at any time not be effectively stayed,
or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against any Borrower or Guarantor or any
of
the Collateral having a value in excess of $750,000;
(e) any
Obligor (being a natural person or a general partner of an Obligor which is
a
partnership) dies or any Borrower or Obligor, which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves
or
suspends or discontinues doing business;
(f) any
Borrower or Guarantor makes an assignment for the benefit of creditors, makes
or
sends notice of a bulk transfer of any of their respective assets or calls
a
meeting of its creditors or principal creditors in connection with a moratorium
or adjustment of the Indebtedness due to them;
(g) a
case or
proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity) is filed
against any Obligor (other than Debtors) or all or any part of its properties
and such petition or application is not dismissed within thirty (30) days after
the date of its filing or any Obligor (other than Debtors) shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or
the
relief requested is granted sooner;
80
(h) a
case or
proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed
by
any Obligor (other than Debtors) or for all or any part of its
property;
(i) any
default (other than any default (x) resulting from the commencement of the
Chapter 11 Cases and (y) that has been stayed by the commencement of the Chapter
11 Cases) by any Borrower or Guarantor under any agreement, document or
instrument relating to any Indebtedness owing to any person other than Lenders,
or any capitalized lease obligations, contingent indebtedness in connection
with
any guarantee, letter of credit, indemnity or similar type of instrument in
favor of any person other than Lenders, in an amount in excess of $750,000
which
default continues for more than the applicable cure period, if any, with respect
thereto, or any default (other than any default (A) resulting from the
commencement of the Chapter 11 Cases, (B) the financial condition of the
Borrowers and Guarantors immediatly prior to the Petition Date as disclosed
to
Agent and Lenders in writing, (C) the delisting of the stock of Parent or any
of
its Subsidiaries from the New York Stock Exchange, or (D) Borrowers closing
certain of their store locations either (A) with the prior written consent
of
Agent with respect to such store closures or (B) to the extent permitted by
Section 9.7(e) hereof) by any Borrower or Guarantor under any Material Contract,
which default continues for more than the applicable cure period, if any, with
respect thereto and/or is not waived in writing by the other parties thereto
or,
other than in connection with the Nova Event, any Credit Card Issuer or Credit
Card Processor withholds payment of amounts otherwise payable to a Borrower
to
fund a reserve account or otherwise hold as collateral, or shall require a
Borrower to pay funds into a reserve account or for such Credit Card Issuer
or
Credit Card Processor to otherwise hold as collateral, or any Borrower shall
provide a letter of credit, guarantee, indemnity or similar instrument to or
in
favor of such Credit Card Issuer or Credit Card Processor such that in the
aggregate all of such funds in the reserve account, other amounts held as
collateral and the amount of such letters of credit, guarantees, indemnities
or
similar instruments shall exceed $750,000 or any such Credit Card Issuer or
Credit Card Processor shall debit or deduct any amounts in excess of $750,000
in
the aggregate in any fiscal year of Borrowers and Guarantors from any deposit
account of any Borrower;
(j) other
than in connection with the Nova Event, any Credit Card Issuer or Credit Card
Processor shall send notice to Borrower that it is ceasing to make or suspending
payments to Borrower of amounts due or to become due to Borrower or shall cease
or suspend such payments, or shall send notice to Borrower that it is
terminating its arrangements with Borrower or such arrangements shall terminate
as a result of any event of default under such arrangements, which continues
for
more than the applicable cure period, if any, with respect thereto, unless
(in
the case of any of the foregoing) Borrower shall have entered into arrangements
with another Credit Card Issuer or Credit Card Processor, as the case may be,
within sixty (60) days after the date of any such notice;
81
(k) other
than any Event of Default which may arise herunder as a result of the sending
by
BancorpSouth Bank to Working Capital Agent and Administrative Borrower of the
notice of ternmination, dated March 20, 2007, with respect to the BancorpSouth
Deposit Account Control Agreement, any bank at which any deposit account of
Borrower or Guarantor is maintained shall fail to comply with any of the
material terms of any Deposit Account Control Agreement to which such bank
is a
party or any securities intermediary, commodity intermediary or other financial
institution at any time in custody, control or possession of any investment
property of Borrower or Guarantor shall fail to comply with any of the material
terms of any Investment Property Control Agreement to which such person is
a
party, unless (in the case of any of the foregoing) Borrower or Guarantor shall
have entered into arrangements with such person or other persons within thirty
(30) days of such failure;
(l) any
material provision hereof or of any of the other Financing Agreements shall
for
any reason cease to be valid, binding and enforceable with respect to any party
hereto or thereto (other than Agent) in accordance with its terms, or any such
party shall challenge the enforceability hereof or thereof, or shall assert
in
writing, or take any action or fail to take any action based on the assertion
that any provision hereof or of any of the other Financing Agreements has ceased
to be or is otherwise not valid, binding or enforceable in accordance with
its
terms, or any security interest provided for herein or in any of the other
Financing Agreements shall cease to be a valid and perfected first priority
security interest in any of the Collateral purported to be subject thereto
except as otherwise permitted herein or therein and except as to Collateral
having an aggregate value of not more than $750,000;
(m) an
ERISA
Event shall occur which results in or could reasonably be expected to result
in
liability of any Borrower in an aggregate amount in excess of
$750,000;
(n) any
Change of Control;
(o) the
indictment by any Governmental Authority, or as Agent may reasonably and in
good
faith determine, the threatened indictment by any Governmental Authority of
any
Borrower or Guarantor of which any Borrower, Guarantor or Agent receives notice,
in either case, as to which there is a reasonable possibility of an adverse
determination, in the good faith determination of Agent, under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against such Borrower or Guarantor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture
of
(i) any of the Collateral having a value in excess of $750,000 or (ii) any
other
property of any Borrower or Guarantor which is necessary or material to the
conduct of its business;
(p) Intentionally
Omitted;
(q) the
occurrence of any condition or event which permits Agent and Lenders to exercise
any of the remedies set forth in the Financing Order, including, without
limitation, any "Event of Default" (as defined in the Financing
Order);
82
(r) the
termination or non-renewal of the Financing Agreements other than as provided
for in the Financing Order;
(s) any
Borrower or Guarantor suspends or discontinues or is enjoined by any court
or
govenmental agency from continuing to conduct all or any material part of its
business, or a trustee, receiver or custodian is appointed for any Borrower
or
Guarantor, or any of its properties;
(t) any
act,
condition or event occurring after the Petition Date that has or would
reasonably be expected to have a Material Adverse Effect upon the assets of
any
Borrower or Guarantor, or the Collateral or the rights and remedies of Agent
and
Lenders under this Agreement or any other Financing Agreement or the Financing
Order; provided, that, Agent shall give notice of the Event of Default to the
extent required by the Financing Order that shall set forth such act, condition
or event in reasonable detail;
(u) the
conversion of any of the Chapter 11 Cases to a Chapter 7 case under the
Bankruptcy Code;
(v) the
dismissal of any of the Chapter 11 Cases or any subsequent Chapter 7 case,
either voluntarily or involuntarily;
(w) the
grant
by any Person of a lien on or other interest in any of the Collateral other
than
a lien or encumbrance permitted by Section 9.8 hereof or by the Financing Order
or an administrative expense claim other than an administrative expense claim
permitted by the Financing Order or this Agreement by the grant of or allowance
by the Bankruptcy Court which is superior to or ranks in parity with Agent's
security interest in or lien upon the Collateral or their Superpriority Claim
(as defined in the Financing Order);
(x) the
Financing Order shall be modified, reversed, revoked, remanded, stayed,
recinded, vacated or amended on appeal or by the Bankruptcy Court without the
prior written consent of Agent (and no such consent shall be implied from any
other authorization or acquiescence by Agent or any Lender);
(y) the
appointment of a trustee pursuant to sections 1104(a)(1) or 1104(a)(2) of the
Bankruptcy Code;
(z) the
appointment of an examiner with special powers pursuant to Section 1104(a)
of
the Bankruptcy Code;
(aa) an
application for any of the orders described in clauses (u) through (z) above
shall be made by a Person other than Borrowers and such application is not
contested by Borrowers in good faith and the relief requested is granted in
an
order that is not stayed pending appeal;
(bb) (i)
any
Borrower or Guarantor shall attempt to invalidate, reduce or otherwise impair
the Liens or security interests of Agent or any Lender, claims or rights against
such Person or subject any Collateral to assessment pursuant to Section 506(c)
of the Bankruptcy Code, (ii) any Lien or security interest created by this
Agreement or the Financing Order shall, for any reason, cease to be valid,
or
(iii) any action is commenced by any Borrower or Guarantor which contests the
validity, perfection or enforceability of any of the Liens and security
interests of Agent or any Lender created by the Financing Order, this Agreement
or any other Financing Agreement;
83
(cc) the
determination of any Borrower or Guarantor, whether by vote of such Person's
board of directors or otherwise, to (i) suspend the operation of such Person's
business in the ordinary course, (ii) liquidate all or substantially all of
such
Person's assets, or (iii) employ an agent or other third party to conduct any
sales of all or substantially all of such Person's assets, or (iv) the filing
of
a motion or other application in the Chapter 11 Cases, seeking authority to
do
any of the foregoing, which does not provide for payment in full of all
Obligations in cash;
(dd) an
order
shall be entered by the Bankruptcy Court that is not stayed pending appeal
granting relief from the automatic stay to any creditor of any Borrower or
Guarantor with respect to the ability to pay or the request to make payments
in
respect of any claim in an amount equal to or exceeding $250,000 in the
aggregate;
(ee) the
filing of a plan of reorganization by or on behalf of any Borrower or Guarantor
to which Agent has not consented in writing, which does not provide for payment
in full of all Obligations in cash on the effective date thereof in accordance
with the terms and conditions contained herein; or
(ff) the
confirmation of a plan of reorganization in the Chapter 11 Case of any Borrower
or Guarantor to which Agent has not consented to in writing, which does not
provide for payment in full of all Obligations in cash on the effective date
thereof in accordance with the terms and conditions contained
herein.
10.2 Remedies.
(a) At
any
time an Event of Default has occurred and is continuing, Agent and Lenders
shall
have all rights and remedies provided in this Agreement, the other Financing
Agreements, the UCC and other applicable law, all of which rights and remedies
may be exercised without notice to or consent by any Borrower or Guarantor,
except as such notice or consent is expressly provided for hereunder or under
the Financing Order or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative,
not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Guarantor of this
Agreement or any of the other Financing Agreements. Subject to
Section 12 hereof, Agent may, and at the direction of the Required Lenders
shall, at any time or times, proceed directly against any Borrower or Guarantor
to collect the Obligations without prior recourse to the
Collateral.
(b) Without
limiting the generality of the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Agent may, at its option and shall upon
the
direction of the Required Lenders, (i) upon notice to Administrative Borrower,
accelerate the payment of all Obligations and demand immediate payment thereof
to Agent for itself and the benefit of Lenders (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
all Obligations shall automatically become immediately due and payable), and
(ii) terminate the Agreement (provided, that, upon the occurrence of any Event
of Default described in Sections 10.1(g) and 10.1(h), all obligations of the
Agent or a Lender hereunder shall automatically terminate).
84
(c) Without
limiting the foregoing, and subject to the terms of the Intercreditor Agreement,
at any time an Event of Default exists or has occurred and is continuing, Agent
may, in its discretion (i) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(ii) require any Borrower or Guarantor, at Borrowers' expense, to assemble
and
make available to Agent any part or all of the Collateral at any place and
time
designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff
and
realize upon any and all Collateral, (iv) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of
any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker's board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with the Agent having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower
or
Guarantor, which right or equity of redemption is hereby expressly waived and
released by Borrowers and Guarantors and/or (vi) terminate this
Agreement. If any of the Collateral is sold or leased by Agent upon
credit terms or for future delivery, the Obligations shall not be reduced as
a
result thereof until payment therefor is finally collected by
Agent. If notice of disposition of Collateral is required by law, ten
(10) days prior notice by Agent to Administrative Borrower designating the
time
and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrowers and Guarantors waive any other
notice. In the event Agent institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
each Borrower and Guarantor waives the posting of any bond which might otherwise
be required.
(d) Subject
to the terms of the Intercreditor Agreement, at any time or times that an Event
of Default exists or has occurred and is continuing, Agent may, in its
discretion, enforce the rights of any Borrower or Guarantor against any account
debtor, secondary obligor or other obligor in respect of any of the Accounts
or
other Receivables. Without limiting the generality of the foregoing
and subject to the terms of the Intercreditor Agreement, Agent may, in its
discretion, at such time or times (i) notify any or all account debtors
(including Credit Card Issuers and Credit Card Processors), secondary obligors
or other obligors in respect thereof that the Receivables have been assigned
to
Agent and that Agent has a security interest therein and Agent may direct any
or
all account debtors(including Credit Card Issuers and Credit Card Processors),
secondary obligors and other obligors to make payment of Receivables directly
to
Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any secondary
obligors or other obligors in respect
thereof
without affecting any of the Obligations, (iii) demand, collect or enforce
payment of any Receivables or such other obligations, but without any duty
to do
so,
85
and
Agent
and Lenders shall not be liable for any failure to collect or enforce the
payment thereof nor for the negligence of its agents or attorneys with respect
thereto and (iv) take whatever other action Agent may deem necessary or
desirable for the protection of its interests and the interests of
Lenders. At any time that an Event of Default exists or has occurred
and is continuing, at Agent's request and subject to the terms of the
Intercreditor Agreement, all invoices and statements sent to any account debtor
shall state that the Accounts and such other obligations have been assigned
to
Agent and are payable directly and only to Agent and Borrowers and Guarantors
shall deliver to Agent such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts
as
Agent may require. In the event any account debtor returns Inventory
when an Event of Default exists or has occurred and is continuing, Borrowers
shall, upon Agent's request, and subject to the terms of the Intercreditor
Agreement, hold the returned Inventory in trust for Agent, segregate all
returned Inventory from all of its other property, dispose of the returned
Inventory solely according to Agent's instructions, and not issue any credits,
discounts or allowances with respect thereto without Agent's prior written
consent.
(e) To
the
extent that applicable law imposes duties on Agent or any Lender to exercise
remedies in a commercially reasonable manner (which duties cannot be waived
under such law), each Borrower and Guarantor acknowledges and agrees that it
is
not commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii)
to
fail to obtain third party consents for access to Collateral to be disposed
of,
or to obtain or to fail to obtain consents of any Governmental Authority or
other third party for the collection or disposition of Collateral to be
collected or disposed of, except to the extent such failure violates applicable
law, (iii) to fail to exercise collection remedies against account debtors,
secondary obligors or other persons obligated on Collateral or to remove liens
or encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral
is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as any Borrower or Guarantor, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether
or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing
so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide
to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower and Guarantor acknowledges that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions
by
Agent or any Lender would not be commercially unreasonable in the exercise
by
Agent or any Lender of remedies against the Collateral and that other actions
or
omissions by Agent or any Lender shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section. Without limitation
of
the foregoing, nothing contained in this Section shall be construed to grant
any
rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this Section.
86
(f) For
the
purpose of enabling Agent to exercise the rights and remedies hereunder, each
Borrower and Guarantor hereby grants to Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable at any time an Event of Default
shall exist or have occurred and for so long as the same is continuing) without
payment of royalty or other compensation to any Borrower or Guarantor, to use,
assign, license or sublicense any of the trademarks, service-marks, trade names,
business names, trade styles, designs, logos and other source of business
identifiers and other Intellectual Property and general intangibles now owned
or
hereafter acquired by any Borrower or Guarantor, wherever the same maybe
located, including in such license reasonable access to all media in which
any
of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof.
(g) Subject
to the terms of the Intercreditor Agreement, at any time an Event of Default
exists or has occurred and is continuing, Agent may apply the cash proceeds
of
Collateral actually received by Agent from any sale, lease, foreclosure or
other
disposition of the Collateral to payment of the Obligations, in whole or in
part
and in accordance with the terms hereof, whether or not then due or may hold
such proceeds as cash collateral for the Obligations. Borrowers and
Guarantors shall remain liable to Agent and Lenders for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including attorneys' fees and
expenses.
SECTION
11. JURY
TRIAL WAIVER; OTHER WAIVERS
11.1 Governing
Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The
validity, interpretation and enforcement of this Agreement and the other
Financing Agreements (except as otherwise provided therein) and any dispute
arising out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise, shall be governed by the internal laws of the State
of New York but excluding any principles of conflicts of law or other rule
of
law that would cause the application of the law of any jurisdiction other than
the laws of the State of New York, except to the extent the provisions of the
Bankruptcy Code are applicable and specifically conflict with the
foregoing.
(b) Borrowers,
Guarantors, Agent and Lenders irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York in
New
York County and the United States District Court for the Southern District
of
New York, whichever Agent may elect, and waive any objection based on venue
or
forum non conveniens with respect to any action instituted therein arising
under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that
any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent and Lenders shall have the right to bring
any
action or proceeding against any Borrower or Guarantor or its or their property
in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or Guarantor or its or their property).
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(c) Each
Borrower and Guarantor hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by U.S.
certified mail (return receipt requested) directed to its address set forth
herein and service so made shall be deemed to be completed immediately upon
receipt thereof by the applicable Borrower or Guarantor, or, at Agent's option,
by service upon any Borrower or Guarantor (or Administrative Borrower on behalf
of such Borrower or Guarantor) in any other manner provided under the rules
of
any such courts. Within thirty (30) days after such service, such
Borrower or Guarantor shall appear in answer to such process, failing which
such
Borrower or Guarantor shall be deemed in default and judgment may be entered
by
Agent against such Borrower or Guarantor for the amount of the claim and other
relief requested.
(d) BORROWERS,
GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY
OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR
ANY
OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR
ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
IN
CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT AND
LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION
OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY
BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART
OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Agent
and
Lenders shall not have any liability to any Borrower or Guarantor (whether
in
tort, contract, equity or otherwise) for losses suffered by such Borrower or
Guarantor in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined
by a
final and non-appealable judgment or court order binding on Agent and such
Lender, that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, Agent and
Lenders shall be entitled to the benefit of the rebuttable presumption that
it
acted in good faith and with the exercise of ordinary care in the performance
by
it of the terms of this Agreement. Each Borrower and
Guarantor: (i) certifies that neither Agent, any Lender, nor any
representative, agent or attorney acting for or on behalf of Agent or any Lender
has represented, expressly or otherwise, that Agent and Lenders would not,
in
the event of litigation, seek to enforce any of the waivers provided for in
this
Agreement or any of the other Financing Agreements and (ii) acknowledges that
in
entering into this Agreement and the other Financing Agreements, Agent and
Lenders are relying upon, among other things, the waivers and certifications
set
forth in this Section 11.1 and elsewhere herein and therein.
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11.2 Waiver
of Notices. Each
Borrower and Guarantor hereby expressly waives demand, presentment, protest
and
notice of protest and notice of dishonor with respect to any and all instruments
and chattel paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein. No notice to or
demand on any Borrower or Guarantor which Agent or any Lender may elect to
give
shall entitle such Borrower or Guarantor to any other or further notice or
demand in the same, similar or other circumstances.
11.3 Amendments
and Waivers.
(a) Neither
this Agreement nor any other Financing Agreement nor any terms hereof or thereof
may be amended, waived, discharged or terminated unless such amendment, waiver,
discharge or termination is in writing signed by Agent and the Required Lenders
or at Agent's option, by Agent with the authorization or consent of the Required
Lenders, and as to amendments to any of the Financing Agreements (other than
with respect to any provision of Section 12 hereof), by any Borrower and such
amendment, waiver, discharger or termination shall be effective and binding
as
to all Lenders only in the specific instance and for the specific purpose for
which given; except, that, no such amendment, waiver, discharge or termination
shall:
(i) reduce
the interest rate or any fees or extend the time of payment of principal,
interest or any fees or reduce the principal amount of the Loan, in each case
without the consent of each Lender directly affected thereby,
(ii) increase
the Commitment of any Lender over the amount thereof then in effect or provided
hereunder, in each case without the consent of the Lender directly affected
thereby
(iii) release
any Collateral (except as expressly required hereunder or under any of the
other
Financing Agreements or applicable law and except as permitted under Section
12.11(b) hereof), without the consent of Agent and all of Lenders,
(iv) reduce
any percentage specified in the definition of Required Lenders, without the
consent of Agent and all of Lenders,
(v) consent
to the assignment or transfer by any Borrower or Guarantor of any of their
rights and obligations under this Agreement, without the consent of Agent and
all of Lenders,
(vi) amend,
modify or waive any terms of this Section 11.3 hereof, without the consent
of
Agent and all of Lenders, or
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(b) Agent
and
Lenders shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its or their rights, powers and/or remedies
unless such waiver shall be in writing and signed as provided
herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of
any right, power and/or remedy on any one occasion shall not be construed as
a
bar to or waiver of any such right, power and/or remedy which Agent or any
Lender would otherwise have on any future occasion, whether similar in kind
or
otherwise.
(c) Notwithstanding
anything to the contrary contained in Section 11.3(a) above, in connection
with
any amendment, waiver, discharge or termination, in the event that any Lender
whose consent thereto is required shall fail to consent or fail to consent
in a
timely manner (such Lender being referred to herein as a "Non-Consenting
Lender"), but the consent of any other Lenders to such amendment, waiver,
discharge or termination that is required are obtained, if any, then Ableco
shall have the right, but not the obligation, at any time thereafter, and upon
the exercise by Ableco of such right, such Non-Consenting Lender shall have
the
obligation, to sell, assign and transfer to Ableco or such Eligible Transferee
as Ableco may specify, the Commitment of such Non-Consenting Lender and all
rights and interests of such Non-Consenting Lender pursuant
thereto. Ableco shall provide the Non-Consenting Lender with prior
written notice of its intent to exercise its right under this Section, which
notice shall specify on date on which such purchase and sale shall
occur. Such purchase and sale shall be pursuant to the terms of an
Assignment and Acceptance (whether or not executed by the Non-Consenting
Lender), except that on the date of such purchase and sale, Ableco, or such
Eligible Transferee specified by Ableco, shall pay to the Non-Consenting Lender
(except as Ableco and such Non-Consenting Lender may otherwise agree) the amount
equal to: (i) the principal balance of the portion of the Loan held by the
Non-Consenting Lender outstanding as of the close of business on the business
day immediately preceding the effective date of such purchase and sale, plus
(ii) amounts accrued and unpaid in respect of interest and fees payable to
the
Non-Consenting Lender to the effective date of the purchase (but in no event
shall the Non-Consenting Lender be deemed entitled to any early termination
fee). Such purchase and sale shall be effective on the date of the
payment of such amount to the Non-Consenting Lender and the Commitment of the
Non-Consenting Lender shall terminate on such date.
(d) The
consent of Agent shall be required for any amendment, waiver or consent
affecting the rights or duties of Agent hereunder or under any of the other
Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section. Notwithstanding anything to the contrary
contained in Section 11.3(a) above, (i) in the event that Agent shall agree
that
any items otherwise required to be delivered to Agent as a condition of the
Loan
hereunder may be delivered after the date hereof, Agent may, in its discretion,
agree to extend the date for delivery of such items or take such other action
as
Agent may deem appropriate as a result of the failure to receive such items
as
Agent may determine or may waive any Event of Default as a result of the failure
to receive such items, in each case without the consent of any Lender and (ii)
Agent may consent to any change in the type of organization, jurisdiction of
organization or other legal structure of any Borrower, Guarantor or any of
their
Subsidiaries and amend the terms hereof or of any of the other Financing
Agreements as may be necessary or desirable to reflect any such change, in
each
case without the approval of any Lender.
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11.4 Waiver
of Counterclaims. Each
Borrower and Guarantor waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any nature (other then compulsory counterclaims)
in
any action or proceeding involving Agent or any Lender with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom
or
relating hereto or thereto.
11.5 Indemnification.
Each
Borrower and Guarantor shall, jointly and severally, indemnify and hold Agent
and each Lender and their respective officers, directors, agents, employees,
advisors and counsel and their respective Affiliates (each such person being
an
"Indemnitee"), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees and expenses) imposed
on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses
of
counsel except that Borrowers and Guarantors shall not have any obligation
under
this Section 11.5 to indemnify an Indemnitee with respect to a matter covered
hereby resulting from the gross negligence or willful misconduct of such
Indemnitee as determined pursuant to a final, non-appealable order of a court
of
competent jurisdiction (but without limiting the obligations of Borrowers or
Guarantors as to any other Indemnitee). To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section may
be
unenforceable because it violates any law or public policy, Borrowers and
Guarantors shall pay the maximum portion which it is permitted to pay under
applicable law to Agent and Lenders in satisfaction of indemnified matters
under
this Section. To the extent permitted by applicable law, no Borrower
or Guarantor shall assert, and each Borrower and Guarantor hereby waives, any
claim against any Indemnitee, on any theory of liability for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any
of
the other Financing Agreements or any undertaking or transaction contemplated
hereby. No Indemnitee referred to above shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or
any
of the other Financing Agreements or the transaction contemplated hereby or
thereby, except for damages resulting from the gross negligence or willful
misconduct of such Indemnitee as determined pursuant to a final, non-appealable
order of a court of competent jurisdiction. All amounts due under
this Section shall be payable upon demand. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION
12. THE
AGENT
12.1 Appointment,
Powers and Immunities. Each
Secured Party irrevocably designates, appoints and authorizes Ableco to act
as
Agent hereunder and under the other Financing Agreements with such powers as
are
specifically delegated to Agent by the terms of this Agreement and of the other
Financing Agreements, together with such other powers as are reasonably
incidental thereto. Agent (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in
the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Secured Party;
(b)
shall not be responsible to Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any of the
other
Financing Agreements, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for
any
failure by any Borrower or any Guarantor or any other Person to perform any
of
its obligations hereunder or thereunder; and (c) shall not be responsible to
Lenders for any action taken or omitted to be taken by it hereunder or under
any
other Financing Agreement or under any other document or instrument referred
to
or provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Agent
may employ agents and attorneys in fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys in fact selected by
it
in good faith. Agent may deem and treat the payee of any note as the
holder thereof for all purposes hereof unless and until the assignment thereof
pursuant to an agreement (if and to the extent permitted herein) in form and
substance satisfactory to Agent shall have been delivered to and acknowledged
by
Agent.
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12.2 Reliance
by Agent. Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telecopy, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by
or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by
Agent. As to any matters not expressly provided for by this Agreement
or any other Financing Agreement, Agent shall in all cases be fully protected
in
acting, or in refraining from acting, hereunder or thereunder in accordance
with
instructions given by the Required Lenders or all of Lenders as is required
in
such circumstance, and such instructions of such Agents and any action taken
or
failure to act pursuant thereto shall be binding on all Lenders.
12.3 Events
of Default.
(a) Agent
shall not be deemed to have knowledge or notice of the occurrence of a Default
or an Event of Default or other failure of a condition precedent to the Loan
hereunder, unless and until Agent has received written notice from a Lender,
or
Borrower specifying such Event of Default or any unfulfilled condition
precedent, and stating that such notice is a "Notice of Default or Failure
of
Condition". In the event that Agent receives such a Notice of Default
or Failure of Condition, Agent shall give prompt notice thereof to the
Lenders. Agent shall (subject to Section 12.7) take such action with
respect to any such Event of Default or failure of condition precedent as shall
be directed by the Required Lenders to the extent provided for herein; provided,
that, unless and until Agent shall have received such directions, Agent may
(but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to or by reason of such Event of Default or failure of condition
precedent, as it shall deem advisable in the best interest of
Lenders.
(b) Except
with the prior written consent of Agent, no Lender may assert or exercise any
enforcement right or remedy in respect of the Loan or other Obligations, as
against any Borrower or Guarantor or any of the Collateral or other property
of
any Borrower or Guarantor.
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12.4 Ableco
in its Individual Capacity. With
respect to its Commitment and portion of the Loan made by it (and any successor
acting as Agent), so long as Ableco shall be a Lender hereunder, it shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include Wachovia in its
individual capacity as Lender hereunder. Ableco (and any successor
acting as Agent) and its Affiliates may (without having to account therefor
to
any Lender) lend money to, make investments in and generally engage in any
kind
of business with Borrowers (and any of its Subsidiaries or Affiliates) as if
it
were not acting as Agent, and Ableco and its Affiliates may accept fees and
other consideration from any Borrower or Guarantor and any of its Subsidiaries
and Affiliates for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.
12.5 Indemnification.
Lenders
agree to indemnify Agent (to the extent not reimbursed by Borrowers hereunder
and without limiting any obligations of Borrowers hereunder) ratably, in
accordance with their Pro Rata Shares, for any and all claims of any kind and
nature whatsoever that may be imposed on, incurred by or asserted against Agent
(including by any Lender) arising out of or by reason of any investigation
in or
in any way relating to or arising out of this Agreement or any other Financing
Agreement or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including the costs
and expenses that Agent is obligated to pay hereunder) or the enforcement of
any
of the terms hereof or thereof or of any such other documents, provided, that,
no Lender shall be liable for any of the foregoing to the extent it arises
from
the gross negligence or willful misconduct of the party to be indemnified as
determined by a final non-appealable judgment of a court of competent
jurisdiction. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this
Agreement.
12.6 Non-Reliance
on Agent and Other Lenders. Each
Secured Party agrees that it has, independently and without reliance on Agent
or
any other Secured Party, and based on such documents and information as it
has
deemed appropriate, made its own credit analysis of Borrowers and Guarantors
and
has made its own decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Secured Party, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Financing
Agreements. Agent shall not be required to keep itself informed as to
the performance or observance by any Borrower or Guarantor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect
the
properties or books of any Borrower or Guarantor. Agent will use
reasonable efforts to provide Lenders with any information received by Agent
from any Borrower or Guarantor which is required to be provided to Lenders
or
deemed to be requested by Lenders hereunder and with a copy of any Notice of
Default or Failure of Condition received by Agent from any Borrower or any
Lender; provided, that, Agent shall not be liable to any Lender for any failure
to do so, except to the extent that such failure is attributable to Agent's
own
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Except for notices,
reports and other documents expressly required to be furnished to Lenders by
Agent or deemed requested by Lenders hereunder (including the documents provided
for in Section 12.10 hereof), Agent shall not have any duty or responsibility
to
provide any Lender with any other credit or other information concerning the
affairs, financial condition or business of any Borrower or Guarantor that
may
come into the possession of Agent.
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12.7 Failure
to Act. Except
for action expressly required of Agent hereunder and under the other Financing
Agreements, Agent shall in all cases be fully justified in failing or refusing
to act hereunder and thereunder unless it shall receive further assurances
to
its satisfaction from Lenders of their indemnification obligations under Section
12.5 hereof against any and all liability and expense that may be incurred
by it
by reason of taking or continuing to take any such action.
12.8 Intentionally
Omitted.
12.9 Concerning
the Collateral and the Related Financing Agreements.
Each
Secured Party authorizes and directs Agent to enter into this Agreement and
the
other Financing Agreements. Each Secured Party agrees that any action
taken by Agent or Required Lenders in accordance with the terms of this
Agreement or the other Financing Agreements and the exercise by Agent or
Required Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall
be
binding upon all Secured Parties.
12.10 Field
Audit, Examination Reports and other Information; Disclaimer by
Lenders. By
signing this Agreement, each Lender:
(a) is
deemed
to have requested that Agent furnish such Lender (and Agent agrees that it
will
furnish to such Lender), promptly after it becomes available, a copy of each
field audit or examination report and report with respect to the Borrowing
Base
prepared or received by Agent (each field audit or examination report and report
with respect to the Borrowing Base being referred to herein as a "Report" and
collectively, "Reports"), appraisals with respect to the Collateral and
financial statements with respect to Parent and its Subsidiaries received by
Agent;
(b) expressly
agrees and acknowledges that Agent (i) does not make any representation or
warranty as to the accuracy of any Report, appraisal or financial statement
or
(ii) shall not be liable for any information contained in any Report, appraisal
or financial statement;
(c) expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or any other party performing any audit or examination
will inspect only specific information regarding Borrowers and Guarantors and
will rely significantly upon Borrowers' and Guarantors' books and records,
as
well as on representations of Borrowers' and Guarantors' personnel;
and
(d) agrees
to
keep all Reports confidential and strictly for its internal use in accordance
with the terms of Section 13.5 hereof, and not to distribute or use any Report
in any other manner.
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12.11 Collateral
Matters.
(a) Agent
may, at its option, from time to time, at any time on or after an Event of
Default and for so long as the same is continuing or upon any other failure
of a
condition precedent to the Loan hereunder, make such disbursements and advances
("Special Agent Advances") which Agent, in its sole discretion, (i) deems
necessary or desirable either to preserve or protect the Collateral or any
portion thereof or (ii) to enhance the likelihood or maximize the
amount of repayment by Borrowers and Guarantors of the Loan and other
Obligations, provided, that, the aggregate principal amount of the
Special Agent Advances pursuant to this clause (ii) shall not exceed the amount
equal to five (5%) percent of the Maximum Credit, or (iii) to pay any other
amount chargeable to any Borrower or Guarantor pursuant to the terms of this
Agreement or any of the other Financing Agreements consisting of (A) costs,
fees
and expenses. The Special Agent Advances shall be repayable on demand
and together with all interest thereon shall constitute Obligations secured
by
the Collateral. Special Agent Advances shall not constitute the Loan
but shall otherwise constitute Obligations hereunder. Interest on
Special Agent Advances shall be payable at the Interest Rate then applicable
to
Prime Rate Loans and shall be payable on demand. Each Lender agrees
that it shall make available to Agent, upon Agent's demand, in immediately
available funds, the amount equal to such Lender's Pro Rata Share of each such
Special Agent Advance. If such funds are not made available to Agent
by such Lender, Agent shall be entitled to recover such funds, on demand from
such Lender together with interest thereon for each day from the date such
payment was due until the date such amount is paid to Agent at the Federal
Funds
Rate for each day during such period (as published by the Federal Reserve Bank
of New York or at Agent's option based on the arithmetic mean determined by
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of the three leading
brokers of Federal funds transactions in New York City selected by Agent) and
if
such amounts are not paid within three (3) days of Agent's demand, at the
highest Interest Rate provided for in Section 3.1 hereof applicable to Prime
Rate Loans.
(b) Lenders
hereby irrevocably authorize Agent, at its option and in its discretion to
release any security interest in, mortgage or lien upon, any of the Collateral
(i) upon termination of the Commitments and payment and satisfaction of all
of
the Obligations and delivery of cash collateral to the extent required under
Section 13.1 below, or (ii) constituting property being sold or disposed of
if
Administrative Borrower or any Borrower or Guarantor certifies to Agent that
the
sale or disposition is made in compliance with Section 9.7 hereof (and Agent
may
rely conclusively on any such certificate, without further inquiry), or (iii)
constituting property in which any Borrower or Guarantor did not own an interest
at the time the security interest, mortgage or lien was granted or at any time
thereafter, or (iv) having a value in the aggregate in any twelve (12) month
period of less than $5,000,000, and to the extent Agent may release its security
interest in and lien upon any such Collateral pursuant to the sale or other
disposition thereof, such sale or other disposition shall be deemed consented
to
by Lenders, or (v) if required or permitted under the terms of any of the other
Financing Agreements, including any intercreditor agreement (including the
Intercreditor Agreement), or (vi) approved, authorized or ratified in writing
by
all of Lenders. Except as provided above, Agent will not release any
security interest in, mortgage or lien upon, any of the Collateral without
the
prior written authorization of all of Lenders. Upon request by Agent at any
time, Lenders will promptly confirm in writing Agent's authority to release
particular types or items of Collateral pursuant to this Section.
95
(c) Without
any manner limiting Agent's authority to act without any specific or further
authorization or consent by the Required Lenders, each Lender agrees to confirm
in writing, upon request by Agent, the authority to release Collateral conferred
upon Agent under this Section. Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the security interest, mortgage or liens granted to Agent upon
any Collateral to the extent set forth above; provided, that, (i) Agent shall
not be required to execute any such document on terms which, in Agent's opinion,
would expose Agent to liability or create any obligations or entail any
consequence other than the release of such security interest, mortgage or liens
without recourse or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any security interest, mortgage
or lien upon (or obligations of any Borrower or Guarantor in respect of) the
Collateral retained by such Borrower or Guarantor.
(d) Agent
shall have no obligation whatsoever to any Lender or any other Person to
investigate, confirm or assure that the Collateral exists or is owned by any
Borrower or Guarantor or is cared for, protected or insured or has been
encumbered, or that the liens and security interests granted to Agent pursuant
hereto or any of the Financing Agreements or otherwise have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available
to
Agent in this Agreement or in any of the other Financing Agreements, it being
understood and agreed that in respect of the Collateral, or any act, omission
or
event related thereto, subject to the other terms and conditions contained
herein, Agent may act in any manner it may deem appropriate, in its discretion,
given Agent's own interest in the Collateral as a Lender and that Agent shall
have no duty or liability whatsoever to any other Lender.
(e) Without
limiting the generality of the foregoing, each Lender authorizes Agent to enter
into the Intercreditor Ageement on behalf of such lender and agress that it
will
be bound by the terms of the Intercreditor Agreement, whether or not such Lender
executes the Intercreditor Agreement.
12.12 Agency
for Perfection. Each
Secured Party hereby appoints Agent and each other Secured Party as agent and
bailee for the purpose of perfecting the security interests in and liens upon
the Collateral of Agent in assets which, in accordance with Article 9 of the
UCC
can be perfected only by possession (or where the security interest of a secured
party with possession has priority over the security interest of another secured
party) and Agent and each Secured Party hereby acknowledges that it holds
possession of any such Collateral for the benefit of Agent as secured
party. Should any Secured Party obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13 Successor
Agent. Agent
may
resign as Agent upon thirty (30) days' notice to Lenders and Parent. If Agent
resigns under this Agreement, the Required Lenders shall appoint from among
the
Lenders a successor agent for Lenders. If no successor agent is
appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with Lenders and Parent, a successor agent from among
Lenders. Upon the acceptance by the Lender so selected of its
appointment as successor agent hereunder, such successor agent shall succeed
to
all of the rights, powers and duties of the retiring Agent and the term "Agent"
as used herein and in the other Financing Agreements shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall
be
terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 12 shall inure to its benefit as to any
actions taken or omitted by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by
the date which is thirty (30) days after the date of a retiring Agent's notice
of resignation, the retiring Agent's resignation shall nonetheless thereupon
become effective and Lenders shall perform all of the duties of Agent hereunder
until such time, if any, as the Required Lenders appoint a successor agent
as
provided for above.
96
12.14 Other
Agent Designations. Agent
may
at any time and from time to time determine that a Lender may, in addition,
be a
"Co-Agent", "Syndication Agent", "Documentation Agent" or similar designation
hereunder and enter into an agreement with such Lender to have it so identified
for purposes of this Agreement. Any such designation shall be
effective upon written notice by Agent to Administrative Borrower of any such
designation. Any Lender that is so designated as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation by Agent
shall have no right, power, obligation, liability, responsibility or duty under
this Agreement or any of the other Financing Agreements other than those
applicable to all Lenders as such. Without limiting the foregoing,
the Lenders so identified shall not have or be deemed to have any fiduciary
relationship with any Lender and no Lender shall be deemed to have relied,
nor
shall any Lender rely, on a Lender so identified as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation in deciding
to enter into this Agreement or in taking or not taking action
hereunder.
SECTION
13. TERM
OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This
Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and
effect for a term ending on the earlier to occur of (i) June 15, 2009, (ii)
the
confirmation of a plan of reorganization for Borrowers and Guarantors in the
Chapter 11 Cases, or (iii) the last termination date set forth in the Permanent
Financing Order (the earlier to occur of clauses (i), (ii) and (iii) refered
to
herein as the "Maturity Date"); provided, that, this Agreement and
all other Financing Agreements must be terminated
simultaneously. Upon the Maturity Date or any other effective date of
termination of the Financing Agreements, Borrowers shall pay to Agent all
outstanding and unpaid Obligations and shall furnish cash collateral to Agent
(or at Agent's option, a letter of credit issued for the account of Borrowers
and at Borrowers' expense, in form and substance satisfactory to Agent, by
an
issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts
as Agent determines are reasonably necessary to secure Agent and Lenders from
loss, cost, damage or expense, including attorneys' fees and expenses, in
connection with any contingent Obligations, including checks or other payments
provisionally credited to the Obligations and/or as to which Agent or any Lender
has not yet received final and indefeasible payment (and including any
contingent liability of Agent to any bank at which deposit accounts of Borrowers
and Guarantors are maintained under any Deposit Account Control
Agreement). Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Administrative Borrower for such
purpose. Interest shall be due until and including the next Business
Day, if the amounts so paid by Borrowers to the Agent Payment Account or other
bank account designated by Agent are received in such bank account later than
12:00 noon, Dallas, Texas time.
97
(b) No
termination of the Commitments, this Agreement or any of the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or any of
the
other Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent's continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and
paid. Accordingly, each Borrower and Guarantor waives any rights it
may have under the UCC to demand the filing of termination statements with
respect to the Collateral and Agent shall not be required to send such
termination statements to Borrowers or Guarantors, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid and satisfied in full in
immediately available funds.
13.2 Interpretative
Provisions.
(a) All
terms
used herein which are defined in Article 1, Article 8 or Article 9 of the UCC
shall have the meanings given therein unless otherwise defined in this Agreement
and except that the term "Lien" or "lien" shall have the meaning set forth
in
§ 101(37) of the Bankruptcy Code.
(b) All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural unless the context otherwise requires.
(c) All
references to any Borrower, Guarantor, Agent and Lenders pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(d) The
words
"hereof", "herein", "hereunder", "this Agreement" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not
any
particular provision of this Agreement and as this Agreement now exists or
may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(e) The
word
"including" when used in this Agreement shall mean "including, without
limitation" and the word "will" when used in this Agreement shall be construed
to have the same meaning and effect as the word "shall".
98
(f) An
Event
of Default shall exist or continue or be continuing until such Event of Default
is waived in accordance with Section 11.3 or is cured in a manner satisfactory
to Agent, if such Event of Default is capable of being cured as determined
by
Agent.
(g) All
references to the term "good faith" used herein when applicable to Agent or
any
Lender shall mean, notwithstanding anything to the contrary contained herein
or
in the UCC, honesty in fact in the conduct or transaction
concerned. Borrowers and Guarantors shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by any
Borrower or Guarantor at any time.
(h) Any
accounting term used in this Agreement shall have, unless otherwise specifically
provided herein, the meaning customarily given in accordance with GAAP, and
all
financial computations hereunder shall be computed unless otherwise specifically
provided herein, in accordance with GAAP as consistently applied and using
the
same method for inventory valuation as used in the preparation of the financial
statements of Parent most recently received by Agent prior to the date
hereof. Notwithstanding anything to the contrary contained in GAAP or
any interpretations or other pronouncements by the Financial Accounting
Standards Board or otherwise, the term "unqualified opinion" as used herein
to
refer to opinions or reports provided by accountants shall mean an opinion
or
report that is unqualified and also does not include any explanation,
supplemental comment or other comment concerning the ability of the applicable
person to continue as a going concern or the scope of the audit.
(i) In
the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including", the words "to" and "until" each
mean
"to but excluding" and the word "through" means "to and including".
(j) Unless
otherwise expressly provided herein, the word "month" or "monthly" refers to
a
fiscal period of time.
(k) Unless
otherwise expressly provided herein, (i) references herein to any agreement,
document or instrument shall be deemed to include all subsequent amendments,
modifications, supplements, extensions, renewals, restatements or replacements
with respect thereto, but only to the extent the same are not prohibited by
the
terms hereof or of any other Financing Agreement, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, recodifying,
supplementing or interpreting the statute or regulation.
(l) The
captions and headings of this Agreement are for convenience of reference only
and shall not affect the interpretation of this Agreement.
(m) This
Agreement and other Financing Agreements may use several different limitations,
tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(n) This
Agreement and the other Financing Agreements are the result of negotiations
among and have been reviewed by counsel to Agent and the other parties, and
are
the products of all parties. Accordingly, this Agreement and the
other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent's or any Lender's involvement in their
preparation.
99
13.3 Notices.
(a) All
notices, requests and demands hereunder shall be in writing and deemed to have
been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing by deposit (postage prepaid) in the U.S.
mail. Notices delivered through electronic communications shall be
effective to the extent set forth in Section 13.3(b) below. All
notices, requests and demands upon the parties are to be given to the following
addresses (or to such other address as any party may designate by notice in
accordance with this Section):
If
to any Borrower or Guarantor:
|
Xxxxxxx
Fabrics, Inc.
Xxx
Xxxxxxx Xxx
Xxxxxxx,
XX 00000
Facsimile
No.: (000) 000-0000
Attention:
Xxxx Xxxxxxx
Attention:
Xxxx Xxxxxx
|
with
a copy to:
|
Morris,
Nichols, Arsht & Xxxxxxx LLP
Chase
Manhattan Centre, 18th Floor
0000
Xxxxx Xxxxxx Xxxxxx
X.X.
Xxx 0000
Xxxxxxxxxx,
XX 00000-0000
Facsimile
No.: (000) 000-0000
Attention:
Xxxxxx X. Xxxxxx, Esq.
|
If
to Agent:
|
Ableco
Finance LLC
000
Xxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx, XX 00000
Facsimile
No.: (000) 000-0000
Attention:
Xxxx X. Xxxxxx
|
with
a copy to:
|
Xxxxxxx
Xxxx & Xxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, XX 00000
Facsimile
No.: (000) 000-0000
Attention:
Xxxxxxxx X. Xxxxxxx, Esq.
|
(b) Notices
and other communications to Lenders hereunder may be delivered or furnished
by
electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by Agent or as otherwise determined by Agent,
provided, that, the foregoing shall not apply to notices to any Lender pursuant
to Section 2 hereof if such Lender has notified Agent that it is incapable
of receiving notices under such Section by electronic
communication. Unless Agent otherwise requires, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender's receipt of an acknowledgement from the intended recipient (such as
by
the "return receipt requested" function, as available, return e-mail or other
written acknowledgement), provided, that, if such notice or other communication
is not given during the normal business hours of the recipient, such notice
shall be deemed to have been sent at the opening of business on the next
Business Day for the recipient, and (ii) notices or communications posted to
an
Internet or intranet website shall be deemed received upon the deemed receipt
by
the intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communications is available
and
identifying the website address therefor. Nothing in this Agreement
or in any other Financing Agreement shall be construed to limit or affect the
obligation of the Borrowers and Guarantors or any other Person to serve upon
Agent and Lenders in the manner prescribed by the Bankruptcy Code any pleading
or notice required to be given to Agents and Lenders pursuant to the Bankruptcy
Code.
100
13.4 Partial
Invalidity. If
any
provision of this Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.
13.5 Confidentiality.
(a) Agent
and
each Lender shall use all reasonable efforts to keep confidential, in accordance
with its customary procedures for handling confidential information and safe
and
sound lending practices, any non-public written information concerning any
Borrower or Guarantor supplied to it by any Borrower or Guarantor before or
after the date of this Agreement, together with any and all analyses or other
documents prepared by Agent or a Lender, which contain or otherwise reflect
such
information (collectively, "Confidential Material"), provided, that, nothing
contained herein shall limit the disclosure of any such Confidential Material:
(i) to the extent required by statute, rule, regulation, subpoena or court
order, (ii) to bank examiners and other regulators, auditors and/or
accountants, in connection with any litigation to which Agent or such
Lender is a party, (iii) to any Lender or Participant (or prospective Lender
or
Participant) or to any Affiliate of any Lender so long as such Lender,
Participant (or prospective Lender or Participant) shall have agreed
to treat such Confidential Material as confidential in accordance with this
Section 13.5 and such Lender, Participant (or prospective Lender or Participant)
shall have caused such Affiliate to treat such Confidential Material as
confidential in accordance with this Section 13.5, or (iv) to counsel for
Agent, any Lender or Participant (or prospective Lender or
Participant).
(b) In
the
event that Agent or any Lender receives a request or demand to disclose any
Confidential Material pursuant to any subpoena or court order, Agent or such
Lender, as the case may be, agrees (i) to the extent permitted by applicable
law
or if permitted by applicable law, to the extent Agent or such Lender determines
in good faith that it will not create any risk of liability to Agent or such
Lender, Agent or such Lender will promptly notify Administrative Borrower of
such request so that Administrative Borrower may seek a protective order or
other appropriate relief or remedy and (ii) if disclosure of such Confidential
Material is required, disclose such Confidential Material and, subject to
reimbursement by Borrowers of Agent's or such Lender's expenses, cooperate
with
Administrative Borrower in the reasonable efforts to obtain an order or other
reliable assurance that confidential treatment will be accorded to such portion
of the disclosed Confidential Material which Administrative Borrower so
designates, to the extent permitted by applicable law or if permitted by
applicable law, to the extent Agent, such Lender determines in good faith that
it will not create any risk of liability to Agent or such Lender.
101
(c) In
no
event shall this Section 13.5 or any other provision of this Agreement, any
of
the other Financing Agreements or applicable law be deemed: (i) to apply to
or
restrict disclosure of Confidential Material that has been or is made public
by
any Borrower, Guarantor or any third party or otherwise becomes generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of Confidential Material that
was or becomes available to Agent or any Lender (or any Affiliate of any Lender)
on a non-confidential basis from a person other than a Borrower or Guarantor
(unless Agent or such Lender knows that such Confidential Material was disclosed
in violation of a confidentiality agreement or applicable law), (iii) to require
Agent or any Lender to return any materials furnished by a Borrower or Guarantor
to Agent, a Lender or prevent Agent, a Lender from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange
of
Credit Information promulgated by The Xxxxxx Xxxxxx Associates or other
applicable industry standards relating to the exchange of credit
information. The obligations of Agent and Lenders under this Section
13.5 shall supersede and replace the obligations of Agent and Lenders under
any
confidentiality letter signed prior to the date hereof or any other arrangements
concerning the confidentiality of information provided by any Borrower or
Guarantor to Agent or any Lender. In addition, Agent and Lenders may
disclose information relating to the Credit Facility to Gold Sheets and other
similar publications with such information to consist of deal terms and other
information customarily found in such publications and that Agent and its
affiliates may otherwise use the corporate name and logo of Borrowers and
Guarantors in "tombstones" or other advertisements or public
statements.
(d) For
the
term of the Loan, the Agent and any Lenders and Participants will not, unless
the Administrative Borrower shall have consented in advance in writing, (i)
discuss the Confidential Material with any creditor (other than the Working
Capital Agent and Working Capital Lenders) of or vendor to the Borrowers or
Guarantors that is known by any such Agent, Lender or Participant to be a
creditor or vendor of the Borrowers or Guarantors, (ii) use, directly or
indirectly, the Confidential Material to acquire, or assist, advise or encourage
any other persons in acquiring, control of the Borrowers or Guarantors or any
of
the Borrowers' or Guarantors' debt (other than the Working Capital Debt),
securities or material assets, or (iii) use, directly or indirectly, the
Confidential Material (except in circumstances where the Borrowers or Guarantors
or an affiliate of the Borrowers or Guarantors is willingly engaged in
discussions with a prospective buyer), to propose, commit on, participate in
and/or provide debt financing to a prospective buyer regarding a transaction
involving the Borrowers or Guarantors or such
affiliate. Notwithstanding the foregoing, nothing in this Section
13.5 shall prohibit and/or prevent the exercise by Agent or any Lender of any
of
its rights as a secured creditor of the Borrowers and Guarantors under this
Agreement, the Financing Order and any other Financing Agreement.
102
13.6 Successors.
This
Agreement, the other Financing Agreements and any other document referred to
herein or therein shall be binding upon and inure to the benefit of and be
enforceable by Agent, Secured Parties, Borrowers, Guarantors and their
respective successors and assigns, except that Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders. Any such purported assignment without such express
prior written consent shall be void. No Lender may assign its rights
and obligations under this Agreement without the prior written consent of Agent,
except as provided in Section 13.7 below. The terms and provisions of
this Agreement and the other Financing Agreements are for the purpose of
defining the relative rights and obligations of Borrowers, Guarantors, Agent
and
Lenders with respect to the transactions contemplated hereby and there shall
be
no third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Financing Agreements.
13.7 Assignments;
Participations.
(a) Subject
to the requirements of paragraphs (h) and (i) of this Section 13.7, each Lender
may, with the prior written consent of Agent, assign all or, if less than all,
a
portion equal to at least $5,000,000 in the aggregate for the assigning Lender
(except such minimum amount shall not apply to an assignment by a Lender to
a
Lender, to an Affiliate of such Lender or a Related Fund of such Lender), of
such rights and obligations under this Agreement to one or more Eligible
Transferees or Related Funds (but not including for this purpose any assignments
in the form of a participation), each of which assignees shall become a party
to
this Agreement as a Lender by execution of an Assignment and Acceptance;
provided, that, (i) Borrowers and Agent may continue to deal solely and directly
with such Lender in connection with the interest so assigned until such Lender
and its assignee have delivered to Agent a fully executed Assignment and
Acceptance and (ii) Agent shall have received for its sole account payment
of a
processing fee from the assigning Lender or the assignee in the amount of $5,000
(except the payment of such fee shall not be required in connection with an
assignment by a Lender to a Lender, to an Affiliate of such Lender or a Related
Fund of such Lender).
(b) Agent
(acting solely in the capacity as a non-fiduiciary agent of Borrowers) shall
maintain a register of the names and addresses of Lenders, their Commitments
and
the principal amount of their portion of the Loan (the
"Register"). Agent shall also maintain a copy of each Assignment and
Acceptance delivered to and accepted by it and shall modify the Register to
give
effect to each Assignment and Acceptance. The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and
any
Borrowers, Guarantors, Agent and Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by
Administrative Borrower and any Lender at any reasonable time and from time
to
time upon reasonable prior notice.
(c) Upon
such
execution, delivery, acceptance and recording, from and after the effective
date
specified in each Assignment and Acceptance, the assignee thereunder
shall be a party hereto and to the other Financing Agreements and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to
such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
and thereunder and the assigning Lender shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement.
103
(d) By
execution and delivery of an Assignment and Acceptance, the assignor and
assignee thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and
Acceptance, the assigning Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any of the other Financing
Agreements or the execution, legality, enforceability, genuineness, sufficiency
or value of this Agreement or any of the other Financing Agreements furnished
pursuant hereto, (ii) the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower, Guarantor or any of their Subsidiaries or the performance or
observance by any Borrower or Guarantor of any of the Obligations; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it
has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (iv) such assignee will, independently and
without reliance upon the assigning Lender, Agent and based on such documents
and information as it shall deem appropriate at the time, continue to make
its
own credit decisions in taking or not taking action under this Agreement and
the
other Financing Agreements, (v) such assignee appoints and authorizes Agent
to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and
the
other Financing Agreements are required to be performed by it as a
Lender. Agent and Lenders may furnish any information concerning any
Borrower or Guarantor in the possession of Agent or any Lender from time to
time
to assignees and Participants.
(e) Each
Lender may sell participations to one or more banks or other entities in or
to
all or a portion of its rights and obligations under this Agreement and the
other Financing Agreements (including, without limitation, all or a portion
of
its Commitments and of the Loan owing to it, without the consent of Agent or
the
other Lenders); provided, that, (i) such Lender's obligations under this
Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors, the other Lenders and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Financing
Agreements, and (iii) the Participant shall not be entitled to require such
Lender to take or omit to take any action hereunder except (A) action directly
effecting an extension of the maturity dates or decrease in the principal amount
of the Loan, (B) action directly effecting an extension of the due dates or
a decrease in the rate of interest payable on the Loan or the fees payable
under
this Agreement, or (C) actions directly effecting a release of all or a
substantial portion of the Collateral or any Borrower or Guarantor (except
as
set forth in Section 12.11 of this Agreement or any other Financing
Agreement). The Borrowers and Guarantors agree that each Participant
shall be entitled to the benefits of Section 6.5 and Section 3.3 of this
Agreement with respect to its participation in any portion of the Commitments
and the Loan as if it was a Lender.
104
(f) Nothing
in this Agreement shall prevent or prohibit any Lender from pledging its portion
of the Loan hereunder in support of borrowings made by such Lenders from;
provided, that, no such pledge shall release such Lender from any of its
obligations hereunder or substitute any such pledgee for such Lender as a party
hereto. Any Lender may at any time pledge or grant a security
interest in all or any portion of its rights under Agreement, the other
Financing Agreements and the Loan made by it as collateral security to secure
obligations of such Lender, Affiliates of such Lender or funds or accounts
managed by such Lender or an Affiliate of such Lender.
(g) Borrowers
and Guarantors shall assist Agent or any Lender permitted to sell assignments
or
participations under this Section 13.7 in whatever manner reasonably necessary
in order to enable or effect any such assignment or participation, including
(but not limited to) the execution and delivery of any and all agreements,
notes
and other documents and instruments as shall be requested and the delivery
of
informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrowers shall certify the correctness,
completeness and accuracy, in all material respects, of all descriptions of
Borrowers and Guarantors and their affairs provided, prepared or reviewed by
any
Borrower or Guarantor that are contained in any selling materials and all other
information provided by it and included in such materials.
(h) A
Registered Loan (and the Registered Note, if any, evidencing the same) may
be
assigned or sold in whole or in part only by registration of such assignment
or
sale on the Register (and each Registered Note shall expressly so
provide). Any assignment or sale of all or part of such Registered
Loan (and the Registered Note, if any, evidencing the same) may be effected
only
by registration of such assignment or sale on the Register, together with the
surrender of the Registered Note, if any, evidencing the same duly endorsed
by
(or accompanied by a written instrument of assignment or sale duly executed
by)
the holder of such Registered Note, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new Registered Notes in the same
aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or sale of any
Registered Loan (and the Registered Note, if any evidencing the same), Agent
and
Borrowers shall treat the Person in whose name such Loan (and the Registered
Note, if any, evidencing the same) is registered as the owner thereof for the
purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(i) In
the
event that any Lender sells participations in a Registered Loan, such Lender
shall, on behalf of and acting solely for the purpose as agent of Borrowers,
maintain a register on which it enters the name of all participants in such
Registered Loan and the principal amount (and stated interest thereon) of the
portion of the Registered Loan which is the subject of the participation (the
"Participant Register"). A Registered Loan (and the Registered Note,
if any, evidencing the same) may be participated in whole or in part only by
registration of such participation on the Participant Register (and each
Registered Note shall expressly so provide). Any participation of
such Registered Loan (and the Registered Note, if any, evidencing the same)
may
be effected only by the registration of such participation on the Participant
Register. The Participant Register shall be available for inspection
by the Administrative Borrower or Agent at any reasonable time and from time
to
time upon reasonable prior notice.
105
13.8 Entire
Agreement. This
Agreement, the other Financing Agreements, any supplements hereto or thereto,
and any instruments or documents delivered or to be delivered in connection
herewith or therewith represents the entire agreement and understanding
concerning the subject matter hereof and thereof between the parties hereto,
and
supersede all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or
written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
106
13.9 Counterparts,
Etc. This
Agreement or any of the other Financing Agreements may be executed in any number
of counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Agreement or any of the other Financing Agreements by
telefacsimile or other electronic method of transmission shall have the same
force and effect as the delivery of an original executed counterpart of this
Agreement or any of such other Financing Agreements. Any party
delivering an executed counterpart of any such agreement by telefacsimile or
other electronic method of transmission shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
SECTION
14. GUARANTY
14.1 Guaranty. Each
Guarantor hereby jointly and severally and unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of the Borrowers now or hereafter
existing under any Financing Agreement, whether for principal, interest, fees,
commissions, expense reimbursements, indemnifications or otherwise (such
obligations, to the extent not paid by the Borrowers, being the "Guaranteed
Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) incurred by the Agent and the Lenders in enforcing
any rights under the guaranty set forth in this Section 14.
14.2 Guaranty
Absolute. Each Guarantor jointly and severally guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms
of
the Financing Agreements, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or the Lenders with respect thereto. Each
Guarantor agrees that this Section 14 constitutes a guaranty of payment when
due
and not of collection and waives any right to require that any resort be made
by
the Agent or any Lender to any Collateral. The obligations of each
Guarantor under this Section 14 are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against each
Guarantor to enforce such obligations, irrespective of whether any action is
brought against any Borrower or Guarantor or whether any Borrower or Guarantor
is joined in any such action or actions. The liability of each
Guarantor under this Section 14 shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor hereby irrevocably waives any defenses
it
may now or hereafter have in any way relating to, any or all of the
following:
(a) any
lack
of validity or enforceability of any Financing Agreement or any agreement or
instrument relating thereto;
(b) any
change in the time, manner or place of payment of, or in any other term of,
all
or any of the Guaranteed Obligations, or any other amendment or waiver of or
any
consent to departure from any Financing Agreement, including, without
limitation, any increase in the Guaranteed Obligations resulting from the
extension of additional credit to any Borrower or Guarantor or
otherwise;
107
(c) any
taking, exchange, release or non-perfection of any Collateral, or any taking,
release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;
(d) the
existence of any claim, set-off, defense or other right that any Guarantor
may
have at any time against any Person, including, without limitation, the Agent
or
any Lender;
(e) any
change, restructuring or termination of the corporate, limited liability company
or partnership structure or existence of any Borrower or Guarantir;
or
(f) any
other
circumstance (including, without limitation, any statute of limitations) or
any
existence of or reliance on any representation by the Agent or the Lenders
that
might otherwise constitute a defense available to, or a discharge of, any
Borrower or Guarantor or any other guarantor or surety.
This
Section 14 shall continue to be effective or be reinstated, as the case may
be,
if at any time any payment of any of the Guaranteed Obligations is rescinded
or
must otherwise be returned by the Agent or the Lenders or any other Person
upon
the insolvency, bankruptcy or reorganization of any Borrower or otherwise,
all
as though such payment had not been made.
14.3 Waiver. Each
Guarantor hereby waives (i) promptness and diligence, (ii) notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Section 14 and any requirement that the Agent or the
Lenders exhaust any right or take any action against any Borrower or Guarantor
or any other Person or any Collateral, (iii) any right to compel or direct
the Agent or any Lender to seek payment or recovery of any amounts owed under
this Section 14 from any one particular fund or source or to exhaust any right
or take any action against any other Borrower or Guarantor, any other Person
or
any Collateral, (iv) any requirement that the Agent or any Lender protect,
secure, perfect or insure any security interest or Lien on any property subject
thereto or exhaust any right to take any action against any Borrower or
Guarantor, any other Person or any Collateral, and (v) any other defense
available to any Guarantor. Each Guarantor agrees that the Agent and
the Lenders shall have no obligation to marshal any assets in favor of any
Guarantor or against, or in payment of, any or all of the
Obligations. Each Guarantor acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated herein and
that the waiver set forth in this Section 14.3 is knowingly made in
contemplation of such benefits. Each Guarantor hereby waives any
right to revoke this Section 14, and acknowledges that this Section 14 is
continuing in nature and applies to all Guaranteed Obligations, whether existing
now or in the future.
14.4 Continuing
Guaranty; Assignments. This Section 14 is a continuing guaranty
and shall (a) remain in full force and effect until the later of the cash
payment in full of the Guaranteed Obligations (other than indemnification
obligations as to which no claim has been made) and all other amounts payable
under this Section 14 and the Maturity Date, (b) be binding upon each Guarantor,
its successors and assigns and (c) inure to the benefit of and be enforceable
by
the Agent and the Lenders and their successors, pledgees, transferees and
assigns. Without limiting the generality of the foregoing
clause (c), any Lender may pledge, assign or otherwise transfer all or any
portion of its rights and obligations under this Agreement (including, without
limitation, all or any portion of the Loan,) to any other Person, and such
other
Person shall thereupon become vested with all the benefits in respect thereof
granted such Lender herein or otherwise, in each case as provided in Section
13.7.
108
14.5 Subrogation. No
Guarantor will exercise any rights that it may now or hereafter acquire against
any Borrower or Guarantor or any other guarantor that arise from the existence,
payment, performance or enforcement of such Guarantor's obligations under this
Section 14, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent and the Lenders against any
Borrower or Guarantor or any other guarantor or any Collateral, whether or
not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive from
any
Borrower or Guarantor or any other guarantor, directly or indirectly, in cash
or
other property or by set-off or in any other manner, payment or security solely
on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations and all other amounts payable under this Section 14
shall
have been paid in full in cash. If any amount shall be paid to any
Guarantor in violation of the immediately preceding sentence at any time prior
to the later of the payment in full in cash of the Guaranteed Obligations and
all other amounts payable under this Section 14 and the Maturity Date, such
amount shall be held in trust for the benefit of the Agent and the Lenders
and
shall forthwith be paid to the Agent and the Lenders to be credited and applied
to the Guaranteed Obligations and all other amounts payable under this Section
14, whether matured or unmatured, in accordance with the terms of this
Agreement, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Section 14 thereafter arising. If
(i) any Guarantor shall make payment to the Agent and the Lenders of all or
any part of the Guaranteed Obligations, (ii) all of the Guaranteed
Obligations and all other amounts payable under this Section 14 shall be paid
in
full in cash and (iii) the Maturity Date shall have occurred, the Agent and
the Lenders will, at such Guarantor's request and expense, execute and deliver
to such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation
to
such Guarantor of an interest in the Guaranteed Obligations resulting from
such
payment by such Guarantor.
[REMAINDER
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109
BORROWERS
XXXXXXX
FABRICS, INC., as a debtor and
debtor-in-possession
By: /s/
Xxxxx X.
Fair
Title: V-Pres,
CAO &
Sec.
HF
MERCHANDISING, INC., as a debtor and
debtor-in-possession
By: /s/
Xxxxx X.
Fair
Title: V-Pres,
CAO &
Sec.
XXXXXXX
FABRICS OF MI, INC., as a debtor
and
debtor-in-possession
By: /s/
Xxxxx X.
Fair
Title: V-Pres,
CAO &
Sec.
XXXXXXXXXXXXXX.XXX,
INC., as a debtor and
debtor-in-possession
By: /s/
Xxxxx X.
Fair
Title: Asst.
Sec.
XXXXXXX
FABRICS, LLC, as a debtor and
debtor-in-possession
By: /s/
Xxxxx X.
Fair
Title: Treasurer
GUARANTORS
HF
ENTERPRISES, INC., as a debtor and debtor-
in-possession
By: /s/
Xxxxx X.
Fair
Title: Asst.
Sec.
HF
RESOURCES, INC., as a debtor and debtor-in-
possession
By: /s/
Xxxxx X.
Fair
Title: Asst.
Sec.
[SIGNATURES
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[SIGNATURES
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AGENT
AND LENDER
ABLECO
FINANCE LLC, as Agent and Lender
By: /s/
Xxxx
Xxxxxx
Title: SVP